form6k.htm
 

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 

 FORM 6-K
 

 REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of June, 2012
 

 IRSA Inversiones y Representaciones Sociedad Anónima
(Exact name of Registrant as specified in its charter)
 
IRSA Investments and Representations Inc.
(Translation of registrant´s name into English)


 Republic of Argentina
(Jurisdiction of incorporation or organization)

Bolívar 108
(C1066AAB)
Buenos Aires, Argentina
 (Address of principal executive offices)


 Form 20-F x               Form 40-F  o
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes o               No x
 
 
 
 
 

IRSA INVERSIONES Y REPRESENTACIONES SOCIEDAD ANÓNIMA
(THE “COMPANY”)
 
REPORT ON FORM 6-K
 

Attached is an English translation of the Financial Statements for the seix-month period ended on December 31, 2011 and on December 31, 2010 filed by the Company with the Comisión Nacional de Valores and the Bolsa de Comercio de Buenos Aires:
 
- 1 -
 
 
IRSA Inversiones y Representaciones
Sociedad Anónima

Free translation of the Unaudited Financial Statements
For the six-month periods
beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

 
- 2 -
 
 
IRSA Inversiones y Representaciones
Sociedad Anónima and subsidiaries

Free translation of the Unaudited Consolidated Financial Statements
For the six-month periods
beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

 
- 3 -
 
 

Company:
IRSA Inversiones y Representaciones Sociedad Anónima
Corporate address:
Bolívar 108 – Buenos Aires, Argentina
Principal activity:
Real estate investment and development
 
Financial Statements as of December 31, 2011
Presented in comparative form with the previous fiscal year.
Stated in thousands of pesos
Fiscal year No. 69 beginning July 1st, 2011
 
DATE OF REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE    
Of the By-laws:  June 23, 1943  
Of last amendment:  February 12, 2008  
Registration number with the Superintendence of Corporations:
 213,036  
Duration of the Company: April 05, 2043  
Controlling Company: Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria (Cresud S.A.C.I.F. y A.)  
Corporate Domicile: Moreno 877, Buenos Aires, Argentina  
Principal Activity: Agricultural, livestock and real estate investment  
Shareholding: 63.22%  
 
Information related to subsidiaries is shown in Note 1.a.
 
 
CAPITAL COMPOSITION (Note 14 a. to the Basic Financial Statements)
Type of share
Authorized for
Public Offer of Shares (*)
In thousands of pesos
Subscribed
Paid in
Common share, 1 vote each
578,676,460
578,676
578,676

(*) Company not included in the Optional Statutory System of Public Offer of Compulsory Acquisition.

 

 
- 4 -

 

Unaudited Consolidated Balance Sheets
as of December 31 and June 30, 2011

In thousands of pesos (Notes 1 and 2)
Free translation from the original prepared in Spanish for publication in Argentina

 
   
December 31, 2011
   
June 30, 2011
     
December 31, 2011
   
June 30, 2011
 
                           
ASSETS
           
LIABILITIES
           
CURRENT ASSETS
           
CURRENT LIABILITIES
           
Cash and banks (Note 4)
    217,951       168,170  
Trade accounts payable (Note 11)
    161,916       153,149  
Investments (Note 5)
    170,330       210,183  
Customer advances (Note 12)
    225,634       232,863  
Accounts receivable, net (Note 6)
    302,544       248,998  
Short-term debt (Note 13)
    792,174       683,813  
Other receivables (Note 7)
    146,628       155,169  
Salaries and social security payable (Note 14)
    27,329       35,792  
Inventories (Note 8)
    229,593       262,660  
Taxes payable (Note 15)
    140,368       119,053  
Total Current Assets
    1,067,046       1,045,180  
Other liabilities (Note 16)
    47,717       79,068  
                 
Subtotal Current Liabilities
    1,395,138       1,303,738  
                 
Provisions (Note 17)
    6,396       2,019  
                 
Total Current Liabilities
    1,401,534       1,305,757  
                                   
                 
NON-CURRENT LIABILITIES
               
                 
Trade accounts payable (Note 11)
    24       47  
NON-CURRENT ASSETS
               
Customer advances (Note 12)
    105,302       94,244  
Accounts receivable, net (Note 6)
    18,586       14,300  
Long-term debt (Note 13)
    1,840,947       1,756,919  
Other receivables (Note 7)
    178,922       161,331  
Taxes payable (Note 15)
    299,589       328,692  
Inventories (Note 8)
    92,760       89,441  
Other liabilities (Note 16)
    17,749       18,129  
Investments (Note 5)
    2,010,128       1,946,145  
Subtotal Non-Current Liabilities
    2,263,611       2,198,031  
Fixed assets, net (Note 9)
    3,372,045       3,405,851  
Provisions (Note 17)
    12,267       12,881  
Intangible assets, net
    50,570       42,362  
Total Non-Current Liabilities
    2,275,878       2,210,912  
Subtotal Non-Current Assets
    5,723,011       5,659,430  
Total Liabilities
    3,677,412       3,516,669  
Negative goodwill, net (Note 10)
    (368,036 )     (389,300 )
Minority interest
    315,304       316,826  
Total Non-Current Assets
    5,354,975       5,270,130  
SHAREHOLDERS´ EQUITY
    2,429,305       2,481,815  
Total Assets
    6,422,021       6,315,310  
Total Liabilities and Shareholders´ Equity
    6,422,021       6,315,310  

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
 

         
 
 
 
                                            .
Alejandro G Elsztain
Vice president II
Acting as President

 
- 5 -

 

Unaudited Consolidated Statements of Income
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

In thousands of pesos, except “earnings per share” (Notes 1 and 2)
Free translation from the original prepared in Spanish for publication in Argentina
 
   
December 31, 2011
   
December 31, 2010
 
Revenues
    739,613       697,675  
Costs
    (257,977 )     (270,431 )
Gross profit
    481,636       427,244  
Selling expenses
    (45,550 )     (61,381 )
Administrative expenses
    (105,231 )     (106,152 )
Subtotal
    (150,781 )     (167,533 )
Gain from recognition of inventories at net realizable value
    35,248       35,930  
Net gain from retained interest in securitized receivables
    -       5,042  
Operating income (Note 3)
    366,103       300,683  
Amortization of negative goodwill, net
    8,865       1,819  
Financial results generated by assets:
               
Interest income
    11,144       12,314  
Foreign exchange gain
    17,429       9,349  
Other holding results
    (19,519 )     11,511  
Subtotal
    9,054       33,174  
Financial results generated by liabilities:
               
Interest expense
    (136,217 )     (101,822 )
Foreign exchange loss
    (91,853 )     (20,655 )
Other financial expenses
    (6,526 )     (1,951 )
Subtotal
    (234,596 )     (124,428 )
Financial results, net (Note 18 a.)
    (225,542 )     (91,254 )
Gain on equity investees
    58,570       73,721  
Other expenses, net (Note 18 b.)
    (7,987 )     (15,279 )
Income before taxes and minority interest
    200,009       269,690  
Income tax and Minimum Presumed Income Tax (MPIT)
    (65,313 )     (49,071 )
Minority interest
    (1,644 )     (50,061 )
Net income for the period
    133,052       170,558  
Earnings per share (Note 13 to the Unaudited Basic Financial Statements)
               
Basic net income per share
    0.230       0.295  
Diluted net income per share
    0.230       0.295  

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
 
         
.
Alejandro G Elsztain
Vice president II
Acting as President

 
- 6 -

 
Unaudited Consolidated Statements of Cash Flows
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010
In thousands of pesos (Notes 1 and 2)
Free translation from the original prepared in Spanish for publication in Argentina
   
December 31, 2011
   
December 31, 2010
 
CHANGES IN CASH AND CASH EQUIVALENTS
           
Cash and cash equivalents as of the beginning of the year
    312,274       151,354  
Cash and cash equivalents as of the end of the period
    333,504       297,708  
Net Increase in cash and cash equivalents
    21,230       146,354  
CAUSES OF CHANGES IN CASH AND CASH EQUIVALENTS
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income for the period
    133,052       170,558  
Adjustments to reconcile net income to cash flows from operating activities:
               
Income tax and MPIT
    65,313       49,071  
Gain on equity investees
    (58,570 )     (73,321 )
Amortization of negative goodwill, net
    (8,865 )     (1,819 )
Minority interest
    1,644       50,061  
Gain from recognition of inventories at net realizable value
    (35,248 )     (35,930 )
Allowances and provisions
    19,656       32,460  
Depreciation and amortization
    86,971       79,148  
Accrued interest
    99,881       97,007  
Financial results, net
    135,012       (1,363 )
Long-term incentive program reserve (Note 23 to the Unaudited Basic Financial Statements)
    2,396       -  
Net carrying value of fixed assets sold
    1,138       (255 )
Net loss from the derecognition of intangible assets
    (536 )     -  
Gain from Inventory barter transactions
    -       (19,332 )
Net income from sales of  real estate property
    (3,297 )     -  
Additions of intangible assets
    (1,438 )     -  
Changes in certain assets and liabilities net of non-cash transactions and effects of acquisitions:
               
Increase in accounts receivable, net
    (49,161 )     (121,393 )
Decrease  (Increase) in other receivables
    3,914       (28,530 )
Decrease in inventories
    71,372       27,174  
(Increase) in intangible assets, net
    -       (2,082 )
Increase in trade accounts payable
    18,741       78,907  
(Decrease) in taxes payable, salaries and social security payable
    (90,083 )     (79,924 )
Increase in customer advances
    2,982       27,411  
Decrease in other liabilities
    (22,524 )     (27,932 )
Net cash provided by operating activities
    372,350       219,916  
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Net loans collections
    -       40  
Advance payments for the acquisition of shares
    -       (1,185 )
Increase in current investments
    (1,371 )     (2,927 )
Share-holding increase in equity investees
    (24,040 )     (788,963 )
Increase in minority interest
    212       -  
Acquisition of undeveloped parcels of land
    (200 )     (115 )
Acquisition and improvements of fixed assets
    (49,342 )     (33,858 )
(Outflows) Inflows for the acquisition / sale of subsidiaries, net
    (6,651 )     45,322  
Collection of dividends
    2,669       2,200  
Loans granted to related parties, net
    (10,684 )     26,314  
Net cash used in investing activities
    (89,407 )     (753,172 )
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds (payments) in short-term and long-term debt, net
    75,842       (80,059 )
Loans from related parties, net
    (2,821 )     -  
Bank overdrafts, net
    19,970       190,340  
Capital contribution by minority owners in related parties
    6,808       2,262  
Proceeds from issuance of non-convertible notes, net of expenses
    -       607,449  
Interest paid
    (116,993 )     (53,542 )
Dividends paid
    (219,049 )     (127,079 )
Payments for the acquisition of shares in related companies
    (12,524 )     (10,399 )
Reimbursement of dividends
    6,937       -  
Proceeds from issuance of non-convertible notes, net of expenses
    -       150,638  
Payment of non convertible notes
    (19,883 )     -  
Net cash (used in) generated by financing activities:
    (261,713 )     679,610  
NET INCREASE IN CASH AND CASH EQUIVALENTS
    21,230       146,354  
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
 
         
.
Alejandro G Elsztain
Vice president II
Acting as President
 
- 7 -

 

Unaudited Consolidated Statements of Cash Flows (Continued)
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

In thousands of pesos (Notes 1 and 2)
Free translation from the original prepared in Spanish for publication in Argentina


   
December 31, 2011
   
December 31, 2010
 
Supplemental cash flow information
           
Income tax paid
    78,450       13,486  
                 
Non-cash activities:
               
Decrease in inventories through an increase in fixed assets
    -       9,264  
Issuance of Trust Exchangeable Certificates
    -       18,786  
Increase in non-current investments through a decrease in other liabilities
    -       16,044  
Increase in non-current investments through a decrease in other receivables
    -       36,229  
Increase in minority interest through a decrease in other liabilities
    -       20,557  
Decrease in inventories through an increase in customer advances
    2,602       -  
Decrease in inventories through a decrease in customer advances
    -       1,920  
Decrease in inventories through a decrease in trade accounts payable
    10,925       -  
Transfer of fixed assets to inventories
    10,471       -  
Decrease in other investments through an increase in inventories
    -       64,140  
Increase in inventories through a decrease in non-current investments
    -       14,541  
Cumulative translation adjustment of subsidiaries
    20,061       4,448  
Transfer of undeveloped parcels of land to inventories
    -       3,030  
Increase in other receivables through an increase in taxes payable
    4,795       -  
Decrease in long-term debt through an increase in shareholders´equity
    38       -  
Decrease in intangible assets, through a decrease in trade accounts payable
    1,153       -  
Decrease in other receivables
    8,025       -  
Decrease in account receivable, net
    646       -  
Decrease in non-current investments
    16,004       -  
Decrease in trade accounts payable
    (7,345 )     -  
Decrease in other liabilities
    (17,330 )     -  
Increase in fixed assets, net through an increase in long-term debt
    -       53,896  
                 
                 
Composition of cash and cash equivalents at the period end
               
Cash and Banks
    217,951       102,688  
Current investments
    170,330       273,829  
Subtotal cash and banks and current investments
    388,281       376,517  
Less: (items not considered cash and cash equivalents)
               
Mutual funds
    29,028       56,006  
Retained interest in securitized receivables
    -       1,697  
Stock shares
    17,128       20,611  
Mortgage bonds issued by Banco Hipotecario S.A.
    481       479  
Interest receivable Non-Convertible Notes Cresud S.A.C.I.F. y A.
    8,127       -  
Other investments
    13       16  
Cash and cash equivalents
    333,504       297,708  

         
.
Alejandro G Elsztain
Vice president II
Acting as President

 
- 8 -

 

Unaudited Consolidated Statements of Cash Flows (Continued)

For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010
In thousands of pesos (Notes 1 and 2)
Free translation from the original prepared in Spanish for publication in Argentina


   
December 31, 2011
   
December 31, 2010
 
Sale/Acquisition of subsidiaries
           
-  Accounts receivable, net
    (1,307 )     278,805  
- Other receivables
    (1,436 )     64,299  
- Investments
    -       97,287  
- Fixed assets, net
    (11,885 )     2,829  
-  Intangible assets, net
    (9,434 )     -  
- Trade accounts payable
    1,684       (204,255 )
- Customer advances
    571       -  
- Short-term and long-term debt
    -       (91,173 )
- Salaries and social security payable
    49       (11,221 )
- Taxes payable
    418       (14,637 )
- Other liabilities
    64       9,381  
- Trade accounts payable
    -       6,625  
Net value of assets deconsolidated/acquired/sold not considered cash and cash equivalents.
    (21,276 )     137,940  
- Impairment and sale of investment
    -       (15,326 )
- Remaining investment
    -       (28,968 )
- Minority interest
    (1,434 )     (30,388 )
- Negative goodwill, net
    (12,468 )     3,316  
Net value of assets deconsolidated/acquired/sold
    (35,178 )     66,574  
- Seller financing
    26,989       -  
- Cash in advance
    1,538       (21,252 )
Collection/Payment of cash from sale/acquisition of subsidiaries
    (6,651 )     45,322  

         
.
Alejandro G Elsztain
Vice president II
Acting as President

 
- 9 -

 

Notes to the Unaudited Consolidated Financial Statements

For the six-months periods beginning July 1, 2011 and 2010 and
ended December 31, 2011 and 2010
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina


NOTE 1:
BASIS OF CONSOLIDATION – CORPORATE CONTROL

a.  
Basis of consolidation

Financial Statements have been prepared in constant currency.

The Company has consolidated its balance sheets at December 31, and June 30, 2011, statements of income and cash flows for the six-month periods ended December 31, 2011 and 2010 line by line with the financial statements of its subsidiaries, following the procedure established in Technical Resolution No. 21 of the Federación Argentina de Consejos Profesionales de Ciencias Económicas (“F.A.C.P.C.E.”) and approved by the Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires and by the National Securities Commission. All significant intercompany balances and transactions have been eliminated in consolidation. The Unaudited Consolidated Financial Statements include the assets, liabilities and results of operations of the following controlled subsidiaries:



   
December 31, 2011
   
June 30, 2011
   
December 31, 2011
   
June 30, 2011
 
 
COMPANIES
 
DIRECT AND INDIRECT % OF CAPITAL
   
DIRECT AND INDIRECT % OF VOTING SHARES
 
                         
Ritelco S.A.
    100.00       100.00       100.00       100.00  
Palermo Invest S.A.
    100.00       100.00       100.00       100.00  
Inversora Bolívar S.A.
    100.00       100.00       100.00       100.00  
E-Commerce Latina S.A.
    100.00       100.00       100.00       100.00  
Solares de Santa María S.A. (1)
    100.00       100.00       100.00       100.00  
Hoteles Argentinos S.A.
    80.00       80.00       80.00       80.00  
Alto Palermo S.A. (“APSA”) (2)
    94.87       94.89       94.87       94.89  
Llao Llao Resorts S.A.
    50.00       50.00       50.00       50.00  
Tyrus S.A. ("Tyrus")
    100.00       100.00       100.00       100.00  
Nuevas Fronteras S.A.
    76.34       76.34       76.34       76.34  
Unicity S.A. (1)
    100.00       100.00       100.00       100.00  

(1)  
See Note 16.7. to the Unaudited Basic Financial Statements
(2)  
See Note 16.2. and 18.2. to the Unaudited Basic Financial Statements


 
- 10 -

 



NOTE 1:
(Continued)

a.  
(Continued)

In addition, the assets, liabilities and results of operations of the Company subsidiaries (of which the Company holds a direct interest) that follow have been included in the Unaudited Consolidated Financial Statements, applying the proportionate consolidation method.

COMPANIES
 
DIRECT AND  INDIRECT % OF CAPITAL
   
DIRECT AND INDIRECT % OF VOTING SHARES
 
    December 31, 2011     June 30, 2011     December 31, 2011     June 30, 2011  
Cyrsa S.A. (“CYRSA”) (1)
    50.00       50.00       50.00       50.00  
Canteras Natal Crespo S.A. (2)
    50.00       50.00       50.00       50.00  
Quality Invest S.A.(“Quality”) (3)
    50.00       50.00       50.00       50.00  

(1)  
The Company holds joint control with Cyrela Brazil Realty S.A. Empreendimentos e Partiçipações ("CYRELA"). (See Note 22 A.1.).
(2)  
The Company holds joint control of this company with Euromayor S.A.
(3)  
The Company has joint control of this company with EFESUL S.A (See Note 16.9. to the Unaudited Basic Financial Statements).

They also include assets, liabilities and net income of the companies controlled indirectly through subsidiaries.

b.  
Comparative Information

Balance items as of June 30, 2011 shown in these unaudited financial statements for comparative purposes arise from audited annual financial statements for the year then ended.

Balances for the six-month period ended December 31, 2011 of income and cash flows statements are shown for comparative purposes with the same period of the previous fiscal year.

The financial statements as of June 30, 2011 and December 31, 2010 originally issued have been subject to certain reclassifications required in order to present these figures comparatively with those stated as of December 31, 2011.
 

 
- 11 -

 

NOTE 1:
(Continued)

c.  
Additional information about Tarshop S.A.´s sale

On September 13, 2010, APSA sold 80% of Tarshop S.A.. Consequently, the Unaudited Statement of Income and the Unaudited Statement of Cash Flows as of December 31, 2010 include income and cash flows, respectively, for the two-month period in which APSA still controlled it. As from the sale, results generated from the remaining investment are disclosed under caption “Gain on equity investees”.

The following table shows a summary of the effect that would have had Tarshop S.A.’s de-consolidation on the Statement of Income and Statement of Cash Flows as of December 31, 2010.

Statements of income
 
Financial Statements issued as of December 31, 2010
Ps.
   
Tarshop S.A. as of December 31, 2010
Ps.
   
Financial Statements assuming the sale as of December 31,2010
Ps.
 
Revenues
    697,675       (53,887 )     643,788  
Costs
    (270,431 )     18,032       (252,399 )
Gross profit
    427,244       (35,855 )     391,389  
Operating income (Note 3)
    300,683       (16,454 )     284,229  
Gain on equity investees
    73,721       17,525       91,246  
Net income for the period
    170,558       -       170,558  


Statements of Cash Flows
 
Financial Statements
issued
 as of December 31, 2010
Ps.
   
Tarshop S.A. as of December 31, 2010
Ps.
   
Financial Statements
assuming
the sale as of
December 31,2010
Ps.
 
Cash Flow:
                 
-Provided  by operating activities
    219,916       22,002       241,918  
-(Used in) Provided by investing activities
    (753,172 )     101       (753,071 )
-Provided by (used in) financing activities
    679,610       (28,553 )     651,057  


 
- 12 -

 



NOTE 2:
SIGNIFICANT ACCOUNTING POLICIES

The Financial Statements of the subsidiaries mentioned in Note 1 a., have been prepared on a consistent basis with those applied by the Company. The Note 1 a. to the Unaudited Basic Financial Statements details the most significant accounting policies. Below are the most relevant accounting policies adopted by the subsidiaries, which are not included in that note.

In addition to the description in the Unaudited Basic Financial Statements:

a.  
Revenue recognition

· Revenues from admission rights, leases and services

Leases with tenants are accounted for as operating leases. Tenants are generally charged a rent, which consists of the higher of: (i) a monthly base rent (the “Base Rent”) and (ii) a specified percentage of the tenant’s monthly gross retail revenues (the “Percentage Rent”) (which generally ranges between 4% and 10% of tenant’s gross revenues).

Furthermore, pursuant to the rent escalation clause in most leases, a tenant’s Base Rent generally increases between 7% and 12% each year during the term of the lease. Minimum rental income is recognized on the accrued criteria.

Certain lease agreements contain provisions, which provide for rents based on a percentage of revenues or based on a percentage of revenues volume above a specified threshold. APSA determines the compliance with specific targets and calculates the additional rent on a monthly basis as provided for in the contracts. Thus, these contingent rents are not recognized until the required thresholds are exceeded.

Generally, APSA’s lease agreements vary from 36 to 120 months. Law No. 24,808 provides that tenants may rescind commercial lease agreements after the initial six-months, upon not less than 60 days’ written notice, subject to penalties which vary from one to one and a half months rent if the tenant rescinds during the first year of its lease, and one month of rent if the tenant rescinds after the first year of its lease.

 
- 13 -

 



NOTE 2:                 (Continued)

a.  
(Continued)

Additionally, APSA charges its tenants a monthly administration fee related to the administration and maintenance of the common area and the administration of contributions made by tenants to finance promotional efforts for the overall shopping centers’ operations. The administration fee is prorated among the tenants according to their leases, which varies from shopping center to shopping center. Administration fees are recognized monthly when earned.

In addition to rent, tenants are generally charged “admission rights”, a non-refundable admission fee that tenants may be required to pay upon entering into a lease or upon lease renewal. Admission right is normally paid in one lump sum or in a small number of monthly installments. Admission rights are recognized using the straight-line method over the life of the respective lease agreements.

·  
Lease agent operations

Fibesa S.A., company in which APSA has shares of 99.99996%, acts as the leasing agent for APSA bringing together APSA and potential lessees for the retail space available in certain of the APSA’s shopping centers. Fibesa S.A.’s revenues are derived primarily from collected commissions calculated as a percentage of the final rental income value, admission rights and commissions from rental of advertising spaces. Revenues are recognized at the time that the transaction is successfully concluded.

·  
Consumer Financing operations

Revenues derived from credit card transactions consist of commissions and financing income, charges to clients for life and disability insurance and for statements of account, among others. Commissions are recognized at the time the merchants’ transactions are processed, while the rest financing income is recognized when accrued. Income generated from granting consumer loans mainly includes financial interests, which are recognized by the accrual method during the period, irrespective of whether collection has or has not been made.


 
- 14 -

 



NOTE 2:                 (Continued)

a.  
(Continued)
 
 
·  
 Hotel operations

The Company recognizes revenues from its rooms, catering and restaurant facilities as accrued on the close of each business day.

 
b.
Investments

·  
Equity investees and other non-current investments

The interests held in entities over which the Company does not exert control, joint control or significant influence have been measured for accounting purposes at cost plus any declared dividends.

Given the sale of 80% of Tarshop S.A.’s shares described in Note 22 B.3., as of the date of issuance of these unaudited financial statements, APSA maintains a 20% investment in Tarshop S.A. that is valued by the equity method due to the existence of significant influence by the group of companies on Tarshop S.A.’s decisions and the intention to keep it as a long-term investment.

The equity investments in TGLT S.A. and Hersha Hospitality Trust were valued at their acquisition cost.

 
c.
Intangible assets, net

Intangible assets are carried at restated cost less accumulated amortization and corresponding allowances for impairment in value, if applicable. Included in the intangible assets caption are the following:

· Concession

Intangible assets include Arcos del Gourmet S.A.’s concession right, which will be amortized over the life of the concession agreement (see Notes 22 B.1. and 24 B.5.), after the opening of the shopping center.

· Trademarks

Trademarks include the expenses and fees related to their registration.

 
- 15 -

 



NOTE 2:                 (Continued)

 
c.
(Continued)

· Pre-operating and organization expenses

These expenses are amortized by the straight-line method in 3 years, starting upon the opening of the shopping center.

The net carrying value of these assets does not exceed their estimated recoverable value at period/year end.

· Non-compete agreement

These expenses were amortized by the straight-line method in 28 months, starting upon December 1st, 2009.

Under the agreement executed with Banco Hipotecario S.A. for the sale of Tarshop S.A.’s shares, APSA has signed a non-compete agreement in favor of BHSA and has thus written off this intangible (See Note 22 B.3.).

d.       Negative Goodwill, net

Amortizations were calculated through the straight-line method on the basis of an estimated useful life considering the weighted average of the remaining useful life of the assets acquired.

The residual value of goodwill arising from the acquisition of net assets and shares in companies has been shown in the “Negative goodwill, net” caption. Amortizations were classified in the “Amortization of the negative goodwill, net” caption of the Statement of Income. Goodwill related to the acquisition of interest in subsidiaries is included in non-current investments.

Values thus obtained do not exceed the respective estimated recoverable values at period/year end.


 
- 16 -

 



NOTE 2:                 (Continued)

e.       Liabilities in kind related to barter transactions

Liabilities in kind corresponding to obligations to deliver units to be built are valued considering the value of the assets received or the cost of construction of the units to deliver plus necessary additional costs to transfer the assets to the creditor, the largest, thus reducing its value pro rata the units that are granted notarial titled deed. Liabilities in kind have been shown in the “Trade account payables” caption.


NOTE 3:
NET INCOME BY BUSINESS SEGMENT

The Company has determined that its reportable segments are those that are based on the Company’s method of internal reporting. Accordingly, the Company has six reportable segments. These segments are Development and Sale of properties, Office and other Non-Shopping center Rental Properties, Shopping centers, Hotel Operations, Consumer financing and Financial operations and others.

A general description of each segment follows:

·  
Development and Sale of properties

This segment includes the operating results of the Company´s construction and/or sale of property business.
 
·  
Office and other Non-Shopping center Rental Properties
 
This segment includes the operating results of lease and service revenues of office space and other building properties from tenants.

·  
Shopping centers

This segment includes the operating results of shopping centers activities.



 
- 17 -

 



NOTE 3:
(Continued)
 
·  
Hotel operations

This segment includes the operating results of the Company's hotels principally comprised of room, catering and restaurant revenues.

·  
Consumer financing

Includes the results of granting of consumer credits, of credit cards receivables and related securitization programs carried through Tarshop S.A. (See Note 1 c.) and APSAMEDIA S.A. (See Note 22 B.11.).

·  
Financial operations and others

This segment primarily includes results related to or generated by security transactions and other non-core activities of the Company. This segment also includes gain/loss in equity investees of the company related to the banking industry.

The Company measures its reportable segments based on operating result. Inter-segment transactions, if any, are accounted for at current market prices. The Company evaluates performance of its segments and allocates resources to them based on operating result. The Company is not dependent on any single customer.

The accounting policies of the segments are the same as those described in Note 1 to the Unaudited Basic Financial Statements and in Note 2 to the Unaudited Consolidated Financial Statements.


 
- 18 -

 



NOTE 3:                  (Continued)

The following information provides the operating results from each business segment:

As of December 31, 2011

 
   
Development and Sale of Properties
   
Office and Other Non-Shopping Center Rental Properties (a)
   
Shopping Centers
   
Hotel Operations
   
Consumer Financing
   
Financial Operations and Others
   
Total
 
Revenues
    124,166       91,205       435,980       85,034       3,228       -       739,613  
Costs
    (94,444 )     (15,689 )     (90,198 )     (55,222 )     (2,424 )     -       (257,977 )
Gross profit
    29,722       75,516       345,782       29,812       804       -       481,636  
Selling expenses
    (9,213 )     (4,463 )     (22,879 )     (10,919 )     1,924       -       (45,550 )
Administrative expenses
    (19,166 )     (21,645 )     (42,617 )     (21,523 )     (280 )     -       (105,231 )
Subtotal
    (28,379 )     (26,108 )     (65,496 )     (32,442 )     1,644       -       (150,781 )
Gain from recognition of inventories at net realizable value
    35,248       -       -       -       -       -       35,248  
Operating income/(loss)
    36,591       49,408       280,286       (2,630 )     2,448       -       366,103  
                                                         
Depreciation and amortization (b)
    47       11,294       69,091       6,535       4       -       86,971  
Acquisition of fixed assets, net and intangible assets, net
    -       10,113       36,319       2,910       -       -       49,342  
Non-current investments in equity investees
    87,560       208,804       -       295,497       39,672       977,937       1,609,470  
                                                         
Operating assets
    736,358       1,348,769       2,441,498       502,588       18,506       977,937       6,025,656  
Non-operating assets
    37,462       31,523       (179,119 )     73,936       44,282       388,281       396,365  
Total assets
    773,820       1,380,292       2,262,379       576,524       62,788       1,366,218       6,422,021  
                                                         
Operating liabilities
    20,320       117,533       477,358       39,932       5,430       -       660,573  
Non-operating liabilities
    524,197       468,964       1,614,057       226,237       2,271       181,113       3,016,839  
Total liabilities
    544,517       586,497       2,091,415       266,169       7,701       181,113       3,677,412  
 
(a) Includes offices, commercial and residential premises.
(b) Included in operating income
 
 
 
 

 
NOTE 3:                 (Continued)

The following information provides the operating results from each business segment:

As of December 31, 2010


   
Development and Sale of Properties
   
Office and Other Non-Shopping Center Rental Properties (a)
   
Shopping Centers
   
Hotel Operations
   
Consumer Financing (1)
   
Financial Operations and Others
   
Total
 
Revenues
    117,329       81,712       330,736       105,106       62,792       -       697,675  
Costs
    (87,838 )     (14,535 )     (83,928 )     (62,626 )     (21,504 )     -       (270,431 )
Gross profit
    29,491       67,177       246,808       42,480       41,288       -       427,244  
Selling expenses
    (4,428 )     (4,928 )     (19,045 )     (12,092 )     (20,888 )     -       (61,381 )
Administrative expenses
    (22,343 )     (23,824 )     (34,258 )     (19,475 )     (6,252 )     -       (106,152 )
Subtotal
    (26,771 )     (28,752 )     (53,303 )     (31,567 )     (27,140 )     -       (167,533 )
Gain from recognition of inventories at net realizable value
    35,930       -       -       -       -       -       35,930  
Gain from retained interest in securitized receivables
    -       -       -       -       5,042       -       5,042  
Operating income
    38,650       38,425       193,505       10,913       19,190       -       300,683  
                                                         
Depreciation and amortization (b)
    217       11,247       59,888       7,099       697       -       79,148  
Acquisition of fixed assets, net and intangible assets, net
    14       573       27,963       5,257       51       -       33,858  
Non-current investments in equity investees (c)
    84,062       207,074       -       277,248       49,459       923,807       1,541,650  
                                                         
Operating assets (c)
    671,738       1,367,767       2,413,943       479,881       26,198       1,007,869       5,967,396  
Non-operating assets (c)
    40,754       44,846       (175,462 )     36,913       22,510       378,353       347,914  
Total assets (c)
    712,492       1,412,613       2,238,481       516,794       48,708       1,386,222       6,315,310  
                                                         
Operating liabilities (c)
    24,491       137,990       402,523       39,030       31,112       -       635,146  
Non-operating liabilities (c)
    483,151       436,886       1,568,627       198,135       -       194,724       2,881,523  
Total liabilities (c)
    507,642       574,876       1,971,150       237,165       31,112       194,724       3,516,669  

(a) Includes offices, commercial and residential premises.
(b) Included in operating income
(c) Information as of June 30, 2011
(1) See Note 1.c..
 
 
 
 
- 20 -

 



NOTE 4:                 CASH AND BANKS

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Cash on hand
    2,693       1,768  
Bank accounts
    215,258       166,402  
      217,951       168,170  


NOTE 5:
INVESTMENTS

 
The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Current
           
Mutual funds
    144,581       204,167  
Stock shares
    17,128       2,912  
Mortgage bonds issued by Banco Hipotecario S.A.
    481       477  
Other investments
    13       12  
Interest receivable Non-Convertible Notes Cresud S.A.C.I.F. y A. (Note 24 B.4.)
    8,127       2,615  
Total Current
    170,330       210,183  
                 
Non-current
               
Banco Hipotecario S.A. (1)
    971,304       917,690  
Banco de Crédito & Securitización S.A. (Note 16.10. to the Unaudited  Basic Financial Statements)
    6,633       6,117  
Hersha Hospitality Trust (Note 22 A.2.)
    274,107       277,248  
New Lipstick LLC (Note 22 A.3.)
    120,854       115,946  
Rigby 183 LLC (Note 22 A.6.)
    87,950       91,128  
Tarshop S.A. (Note 22 B.3.)
    39,672       49,459  
Bitania 26 S.A. (Note 22 A.8.)
    21,390       -  
TGLT S.A. (Notes 22 B.12. and 16.8. to the Unaudited Basic Financial Statements)
    59,031       56,381  
Manibil S.A.
    28,529       27,681  
Advance payments for the acquisition of shares (Note 16.10. to the Unaudited Basic Financial Statements)
    272       1,797  
Non-convertible Notes Cresud S.A.C.I.F. y A. (Note 24 B.4.)
    2,690       7,706  
Other investments
    535       501  
Subtotal
    1,612,967       1,551,654  

 
- 21 -

 



NOTE 5:
(Continued)

   
December 31, 2011
   
June 30, 2011
 
Undeveloped parcels of land:
           
Santa María del Plata
    158,750       158,742  
Puerto Retiro (2)
    54,275       54,370  
Caballito plot of land
    45,814       45,814  
Patio Olmos (Note 22 B.4.)
    33,385       33,475  
Zetol plot of land (Note 22 A.5.)
    33,289       31,721  
Air Space Coto
    16,110       16,110  
Air Space Soleil Factory
    6,676       6,676  
Vista al Muelle plot of land (Note 22 A.5.)
    23,231       22,140  
Canteras Natal Crespo
    5,967       5,779  
Pilar
    3,408       3,408  
Other undeveloped parcels of land
    16,256       16,256  
Subtotal
    397,161       394,491  
Total non-current
    2,010,128       1,946,145  

 
(1)
As of December 31, and June 30, 2011, includes Ps. 25,351 and Ps. 21,863, respectively, as goodwill and higher and lesser values and unrealized profits resulting from intergroup transactions. As of December 31, and June 30, 2011 represents 446,515,208 shares with a quoted value at closing equivalent to Ps. 1.48 and Ps. 2.36 per share, respectively.
 
(2)
See Note 21 A.(i).

 
- 22 -

 



NOTE 6:                 ACCOUNT RECEIVABLE, NET

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Leases and services and from the sale of properties receivables
    116,598       18,586       97,025       14,300  
Checks to be deposited
    111,722       -       95,226       -  
Consumer financing receivables
    14,314       -       70,248       -  
Hotel receivables
    15,647       -       9,954       -  
Related parties (Note 19)
    8,043       -       8,767       -  
Receivables with collection agents
    4,616       -       4,869       -  
Pass-through expenses receivables
    36,096       -       18,953       -  
Debtors under legal procedures
    50,691       -       48,954       -  
Receivables from the sale of fixed assets
    -       -       4,034       -  
Notes receivables
    12,537       -       5,987       -  
Credit cards receivables
    523       -       497       -  
Less:
                               
Allowance for leases, services and from sale of properties receivables and consumer financing receivables
    (67,789 )     -       (114,946 )     -  
Allowance for hotel receivables
    (454 )     -       (570 )     -  
      302,544       18,586       248,998       14,300  


 
- 23 -

 

 
NOTE 7:
OTHER RECEIVABLES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Related parties (Note 19)
    45,384       434       42,270       415  
Prepaid expenses and services
    36,254       4,018       43,632       3,114  
Value Added Tax (“VAT”)
    38,202       44,009       42,386       49,059  
Gross revenue tax
    5,337       1,225       6,947       1,067  
MPIT
    2,565       91,205       1,824       84,492  
Income tax, net
    1       -       2,373       -  
Loans granted, net
    684       -       644       -  
Deferred Income Tax
    -       43,400       -       30,383  
Mortgage receivable
    -       2,208       -       2,208  
Others
    18,201       4,673       15,093       4,478  
Less:
                               
Allowance for doubtful mortgage receivable
    -       (2,208 )     -       (2,208 )
Present value
    -       (10,042 )     -       (11,677 )
      146,628       178,922       155,169       161,331  


 
- 24 -

 



NOTE 8:
INVENTORIES

 
The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Horizons Project (Note 22 A.1.)
    175,782       -       209,458       -  
Caballito Nuevo (1)
    2,660       441       5,473       -  
Rosario plot of land (2)
    6,220       -       25,511       -  
Units to be received Beruti (Note 19)(3)
    -       23,608       -       23,309  
Units to be received Caballito (Note 19)(4)
    -       52,205       -       51,999  
El Encuentro (5)
    1,665       1,680       4,432       1,486  
Torres de Rosario (Note 22 B.5.)
    13,625       5,805       9,320       4,388  
Plots of land receivable Pereiraola (6)
    -       8,200       -       8,200  
Inventories (hotel operations)
    3,938       -       3,575       -  
Abril
    358       727       1,085       -  
Museo Renault (7)
    21,148       -       -       -  
Other inventories
    4,197       94       3,806       59  
      229,593       92,760       262,660       89,441  

(1)  
See Note 5 (2) to the Unaudited Basic Financial Statements.
(2)  
See Note 22 B.10.
(3)  
See Note 22 B.6.
(4)  
See Note 16.11 to the Unaudited Basic Financial Statements.
(5)  
See Note 5 (3) to the Unaudited Basic Financial Statements.
(6)  
See Note 16.3 to the Unaudited Basic Financial Statements.
(7)  
See Note 16.1 to the Unaudited Basic Financial Statements.

 
- 25 -

 



NOTE 9:
FIXED ASSETS, NET

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Hotels
           
Llao Llao
    72,802       75,207  
Intercontinental Buenos Aires
    52,678       52,288  
Sheraton Libertador
    39,482       41,091  
Bariloche plots of land
    21,900       21,900  
Subtotal Hotels
    186,862       190,486  
                 
Office buildings
               
Edificio República
    213,161       215,535  
Torre BankBoston
    151,144       152,498  
Bouchard 551
    147,078       148,242  
Intercontinental
    77,163       78,394  
Dot Baires Office Building
    104,069       105,144  
Bouchard 710
    63,764       64,277  
Dique IV
    61,092       62,218  
Maipú 1300
    36,213       36,904  
Costeros Dique IV
    18,229       18,523  
Libertador 498 (See Note 16.1 to the Unaudited  Basic Financial Statements)
    9,819       12,024  
Suipacha 652
    10,258       10,484  
Avda. De Mayo 595
    4,138       4,255  
Madero 1020
    187       197  
Rivadavia 2768
    178       191  
Sarmiento 517
    237       244  
Subtotal Office buildings
    896,730       909,130  
                 
Other fixed assets
               
Catalinas Norte plot of land
    108,802       102,666  
Santa María del Plata
    12,511       12,508  
Constitución 1159
    6,387       6,387  
Museo Renault (See Note 16.1 to the Unaudited Basic Financial Statements)
    1,825       4,692  
Thames (See Note 16.1 to the Unaudited Basic Financial Statements)
    -       3,897  
Casona Abril
    2,424       2,525  
Constitución 1111
    833       854  
Alto Palermo Park
    540       542  
Predio San Martín
    69,435       69,994  
Other
    6,634       5,350  
Subtotal Other fixed assets
    209,391       209,415  

 
- 26 -

 



NOTE 9:                 (Continued)

   
December 31, 2011
   
June 30, 2011
 
Shopping Centers
           
Dot Baires
    488,790       495,836  
Abasto
    321,700       325,352  
Alto Palermo
    267,347       279,937  
Patio Bullrich
    133,984       136,466  
Mendoza Plaza
    121,658       123,312  
Alto Rosario
    138,286       138,472  
Alto Avellaneda
    165,836       169,456  
Paseo Alcorta
    133,140       133,090  
Córdoba Shopping - Villa Cabrera (Note 24 B.1.)
    77,761       78,527  
Soleil Factory
    72,090       68,578  
Alto NOA
    40,565       40,912  
La Ribera
    12,292       -  
Suppliers advances
    16,930       11,151  
Neuquén Project (Note 24 B.2.)
    20,691       17,063  
Buenos Aires Design
    16,711       18,103  
Other fixed assets
    18,157       28,815  
Other properties
    23,860       22,486  
Units to be received Beruti
    9,264       9,264  
Subtotal Shopping Centers
    2,079,062       2,096,820  
Total
    3,372,045       3,405,851  


NOTE 10:                      NEGATIVE GOODWILL, NET

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Goodwill:
           
Alto Palermo S.A.
    19,375       20,194  
Arcos del Gourmet S.A.
    6,259       -  
Torre BankBoston
    5,377       5,481  
Nuevo Puerto Santa Fe S.A.
    6,209       -  
Museo Renault
    1,127       2,951  
Conil S.A.
    343       343  
Subtotal goodwill
    38,690       28,969  

 
- 27 -

 



NOTE 10:                      (Continued)

   
December 31, 2011
   
June 30, 2011
 
Negative goodwill:
           
Alto Palermo S.A. (Note 16.2. to the Unaudited Basic Financial Statements)
    (347,973 )     (358,080 )
Palermo Invest S.A.
    (37,141 )     (38,180 )
Empalme S.A.I.C.F.A. y G.
    (5,878 )     (6,127 )
Mendoza Plaza Shopping S.A.
    (2,697 )     (2,783 )
Unicity S.A.
    (3,601 )     (3,601 )
Emprendimiento Recoleta S.A.
    (102 )     (127 )
Soleil Factory
    (9,334 )     (9,371 )
Subtotal negative goodwill
    (406,726 )     (418,269 )
Total negative goodwill, net
    (368,036 )     (389,300 )


NOTE 11:                      TRADE ACCOUNTS PAYABLE

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Suppliers
    56,842       24       42,414       47  
Accruals
    71,197       -       60,830       -  
Liabilities in kind “Horizons Project” (See Note 22 A.1.)
    25,518       -       36,443       -  
Related parties (Note 19)
    5,177       -       9,905       -  
Others
    3,182       -       3,557       -  
      161,916       24       153,149       47  


NOTE 12:                      CUSTOMER ADVANCES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Customers advances
    115,934       -       137,020       -  
Admission rights
    69,204       77,196       60,822       66,885  
Lease advances
    40,496       28,106       35,021       27,359  
      225,634       105,302       232,863       94,244  

 
- 28 -

 



NOTE 13:                      SHORT-TERM AND LONG–TERM DEBT

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Bank overdrafts
    440,279       -       420,032       -  
Bank loans (1)
    207,906       28,887       128,448       27,585  
Non-Convertible Notes – APSA 2012 US$ 154 M (6)
    14,329       -       28,889       -  
Convertible Notes-  APSA 2014  – US$ 50 M (5)
    2       3,846       3       4,640  
Non-Convertible Notes – APSA 2017 US$ 120 M (4)
    4,516       455,129       4,490       432,591  
Non-Convertible Notes – 2017 (3)
    21,990       641,956       20,960       612,419  
Non-Convertible Notes – 2020 (3)
    32,287       627,467       30,800       598,116  
Related parties (Note 19)
    2,504       -       2,345       -  
Seller financing (2)
    68,361       83,662       47,846       81,568  
      792,174       1,840,947       683,813       1,756,919  

(1)  Balances as of December 31, 2011 includes:

(a) Ps. 30,103 as current balance and Ps. 28,887 as a non-current balance related to debt for purchase República building (see Note 8 (1) a) to the Unaudited Basic Financial Statements).
(b) Ps. 60,713 as current corresponding to loans granted by Banco Provincia due in May and July, 2012 respectively, at a nominal fixed rate of 14% per annum. (See Note 8 (1) b) to the Unaudited Basic Financial Statements).
(c) Ps. 19,398 current balance corresponding to Hoteles Argentinos S.A.’s mortgage loan. (Note 21.A. (ii)).
(d) Ps. 5,724 current balance, which pertain to a loan of Nuevas Fronteras S.A. from Standard Bank Argentina, due in June 2012 at a fixed rate of 15.55%.
(e) Ps. 4,781 as current balance, which pertain to loans of Nuevas Fronteras S.A. from Standard Bank Argentina, due in December 2011 and June 2012, respectively, at a fixed rate in dollars of 3.7% and 3.9% respectively. The amount is disclosed net of issuance expenses for Ps. 222.
(f) Ps. 15,201 as current balance, which pertain to a loan of Nuevas Fronteras S.A. from Banco de San Juan, due in November 2012, at a fixed rate of 15.75% per annum.
(g) Ps. 50,129  as current corresponding to a loan granted by Banco Nación due in November 2012 at a nominal Badlar rate plus 400 basic points.
(h) Ps. 21,526 as current corresponding to a  loan of Real Estate Investment Group L.P. with Citibank N.A., due in December 28, 2012 at a LIBOR rate plus 2.75%.
(i) Ps. 331 which pertain to miscellaneous.

(2)  Balances as of December 31, 2011 includes mainly:

(a) Ps. 23,232 as current balance and a Ps. 11,621 as non-current balance to the debt from acquisition of Zetol S.A. (See Note 22 A.5.).
(b) Ps. 12,919 as current balance and a Ps. 1,608 as non-current balance related to the seller financing for purchase of Arcos del Gourmet S.A. (See Note 22 B.1.).
(c) Ps. 1,361 as current balance and a Ps. 35,639 as non-current balance related to the debt from acquisition of Soleil Factory (See Note 22 B.2.).
(d) Ps. 18,756 as current balance and Ps. 33,141 as non-current balance related to the debt for purchase of Predio San Martín. (Note 22 A.7.).
(e) Ps. 12,093 as current balance and a Ps. 1,653 as non-current balance corresponding to the debt from acquisition of Nuevo Puerto de Santa Fe S.A. (See Note 22 B.9.).

(3)  See Note 17 to the Unaudited Basic Financial Statements.

(4)  See Note 23 A.2. Disclosed net of the issuance debt costs to be accrued for Ps. 2,464 and Ps. 5,600 lower value. See Note 18.1 to the Unaudited Basic Financial Statements

(5)  Corresponds to the outstanding balance of Convertible Notes into shares (“CNB”) issued originally by APSA for an outstanding amount of US$ 50,000, as detailed in Note 23 A.1., net of the CNB underwritten by the Company  as of December 31, 2011 for Ps.6,175 current and Ps. 136,601 non-current. As of December 31, 2011, the non-current balance includes a higher value of Ps. 3,811.

(6)  See Note 23 A.2. Disclosed net of the Notes held by the Company for Ps. 13,276 and issuance debt costs to be accrued for Ps. 7 and Ps. 1,020 of higher value.

 
- 29 -

 



NOTE 14:
SALARIES AND SOCIAL SECURITY PAYABLE

 
The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Provision for vacation and bonuses
    16,339       27,333  
Social Security payable
    6,810       7,596  
Salaries payable
    2,815       61  
Others
    1,365       802  
      27,329       35,792  


NOTE 15:
TAXES PAYABLE

 
The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Income tax provision, net
    70,884       -       67,912       -  
Tax amnesty plan for income tax payable
    1,923       16,431       1,759       17,386  
VAT, net
    18,118       -       21,615       -  
MPIT, net
    2,475       5,743       1,933       -  
Gross revenue tax payable
    5,756       -       1,607       -  
Tax withholdings
    9,206       -       13,345       -  
Provision for tax on shareholders personal assets
    4,575       -       3,961       -  
Tax amnesty plan for gross revenue tax
    1,791       3,736       486       832  
Tax amnesty plan for ABL
    142       -       1,464       1,927  
Deferred Income Tax
    -       273,679       -       308,547  
Others
    25,498       -       4,971       -  
      140,368       299,589       119,053       328,692  


 
- 30 -

 



NOTE 16:
OTHER LIABILITIES

 
The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Accrual for Directors´ fees(1) (Note 19)
    6,383       -       15,612       -  
Guarantee deposits
    3,900       8,100       4,128       6,302  
Derivative financial instrument (Note 25.a))
    1,751       -       -       -  
Payables to National Parks Administration (Note 20)
    1,100       -       1,100       -  
Contributed leasehold improvements (Note 24 B.3.)
    266       9,037       332       9,170  
Other payable
    -       -       16,004       -  
Related parties (Note 19)
    16,248       20       35,674       20  
Dividends payable
    3,128       -       -       -  
Loans with shareholders of related parties
    7,750       263       1,000       252  
Present value
    -       (93 )     -       (95 )
Others
    7,191       422       5,218       2,480  
      47,717       17,749       79,068       18,129  

 
(1)
As of December 31 and June 30, 2011, disclosed net of advances to Directors for Ps. 21,040 and Ps. 37,544 , respectively.


NOTE 17:
PROVISIONS

 
The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Allowance for contingencies
    6,396       12,267       2,019       12,881  
      6,396       12,267       2,019       12,881  

 
- 31 -

 




NOTE 18 a.:
FINANCIAL RESULTS, NET

The breakdown for this item is as follows:

   
December 31, 2011
   
December 31, 2010
 
Financial results generated by assets:
           
Interest income
    8,947       9,991  
Interest on discounting assets
    2,197       2,323  
Subtotal interest income
    11,144       12,314  
Foreign exchange gain
    17,429       9,349  
(Loss)/Gain on financial operations
    (19,519 )     11,511  
Subtotal other holding results
    (19,519 )     11,511  
Total financial results generated by assets
    9,054       33,174  
                 
Financial results generated by liabilities:
               
Interest expense
    (136,210 )     (101,882 )
Interest on discounting liabilities
    (7 )     60  
Subtotal interest expense
    (136,217 )     (101,822 )
Foreign exchange loss
    (91,853 )     (20,655 )
Loss on derivative financial instruments
    (2,100 )     -  
Others
    (4,426 )     (1,951 )
Subtotal other financial expenses
    (6,526 )     (1,951 )
Total financial results generated by liabilities
    (234,596 )     (124,428 )
Total financial results, net
    (225,542 )     (91,254 )


NOTE 18 b.:
OTHER EXPENSES, NET

The breakdown for this item is as follows:

   
December 31, 2011
   
December 31, 2010
 
Other income:
           
Recovery of allowances
    1,811       9  
Sale of client base and assignment of portfolio
    385       -  
Others
    2,053       274  
Subtotal other income
    4,249       283  
Other expenses:
               
Donations
    (4,579 )     (4,070 )
Tax on Shareholders´ personal assets
    (2,035 )     (2,440 )
Provision for contingencies
    (3,696 )     (1,708 )
Unrecoverable VAT
    (19 )     (560 )
Others
    (1,907 )     (6,784 )
Subtotal other expenses
    (12,236 )     (15,562 )
Total Other expenses, net
    (7,987 )     (15,279 )

 
- 32 -

 



NOTE 19:
COMPANIES UNDER LAW No. 19,550 SECTION 33 AND OTHER RELATED PARTIES

a.  
Balances as of December 31 and June 30, 2011 held with related companies, persons and  shareholders are as follows:

Related parties
 
Account receivables – current
   
Other
receivables-
 current
   
Other
receivables-
non current
   
Inventories – Units to be received Beruti and Caballito-
non current
   
Trade accounts
 payable – current
   
Short-term debt
   
Other
liabilities – current
   
Other
liabilities – non current
   
Totals
 
Baicom Networks S.A. (4)
    1       17       434       -       (4 )     -       (23 )     -       425  
Banco Hipotecario S.A. (2)
    276       -       -       -       (1,045 )     -       -       -       (769 )
Cactus Argentina S.A. (2)
    32       -       -       -       (3 )     -       -       -       29  
Canteras Natal Crespo S.A. (4)
    434       48       -       -       -       -       -       -       482  
Consorcio Libertador (3)
    32       25       -       -       (27 )     -       (4 )     -       26  
Consorcio Dock del Plata (3)
    -       -       -       -       (76 )     -       -       -       (76 )
Consorcio Torre Boston (3)
    38       199       -       -       (141 )     -       -       -       96  
Consultores Assets Management S.A. (3)
    2,087       29       -       -       (10 )     -       -       -       2,106  
Cresud S.A.C.I.F. y A. (5)
    52       27,974       -       -       (236 )     -       (14,884 )     -       12,906  
Cyrsa S.A. (4)
    134       220       -       -       (179 )     -       (185 )     -       (10 )
Directors (3)
    1       156       -       -       (49 )     -       (6,383 )     (20 )     (6,295 )
Elsztain Managing Partners Ltd (3)
    -       -       -       -       -       -       (34 )     -       (34 )
Elsztain Reality Partner Master Fund I (3)
    -       105       -       -       -       -       (92 )     -       13  
Elsztain Reality Partner Master Fund II (3)
    -       13       -       -       -       -       (2 )     -       11  
Elsztain Reality Partner Master Fund III (3)
    -       116       -       -       -       -       -       -       116  
Estudio Zang, Bergel y Viñes (3)
    -       51       -       -       (568 )     -       -       -       (517 )
Fundación IRSA (3)
    41       2       -       -       (1 )     -       -       -       42  
Futuros y Opciones.com S.A. (2)
    69       -       -       -       (8 )     -       -       -       61  
Hersha Hospitality Trust (2)
    -       2,817       -       -       -       -       -       -       2,817  
Irsa Developments LP (2)
    -       8       -       -       -       -       (4 )     -       4  
Real Estate Strategies LP (2)
    -       80       -       -       -       -       (9 )     -       71  
Lipstick Management LLC (2)
    -       438       -       -       -       -       -       -       438  
Museo de los Niños (3)
    1,688       -       -       -       (31 )     -       -       -       1,657  
New Lipstick LLC (2)
    -       1,527       -       -       -       -       (692 )     -       835  
Nuevo Puerto Santa Fe (4)
    77       -       -       -       (54 )     -       (7 )     -       16  
Personnel loans (3)
    36       5,803       -       -       (350 )     -       (256 )     -       5,233  
Puerto Retiro S.A. (4)
    59       60       -       -       (5 )     -       -       -       114  
Quality Invest S.A. (4)
    178       -       -       -       -       -       (56 )     -       122  
Tarshop S.A. (2)
    1,174       5,696       -       -       (1 )     -       -       -       6,869  
TGLT S.A. (2)
    1,634       -       -       75,813       (2,389 )     (2,504 )     -       -       72,554  
Totals as of December 31, 2011
    8,043       45,384       434       75,813       (5,177 )     (2,504 )     (22,631 )     (20 )     99,342  

 
- 33 -

 



NOTE 19:                      (Continued)

a.  
(Continued)

Related parties
 
Account receivables - current
   
Other
 receivables -
current
   
Other
 receivables -
non current
   
Inventories – Units to be received Beruti and Caballito-
non current
   
Trade accounts payable -
current
   
Short-term debt
   
Other
liabilities – current
   
Other
liabilities – non current
   
Totals
 
Baicom Networks S.A. (4)
    61       6       415       -       -       -       -       -       482  
Banco Hipotecario S.A. (2)
    225       -       -       -       (252 )     -       -       -       (27 )
Cactus Argentina S.A. (2)
    28       -       -       -       (3 )     -       -       -       25  
Canteras Natal Crespo S.A. (4)
    403       41       -       -       -       -       -       -       444  
Consorcio Libertador (3)
    140       16       -       -       (65 )     -       (4 )     -       87  
Consorcio Torre Boston (3)
    1,076       344       -       -       (836 )     -       -       -       584  
Consultores Assets Management S.A. (3)
    997       29       -       -       (10 )     -       -       -       1,016  
Cresud S.A.C.I.F. y A. (5)
    19       19,112       -       -       (71 )     -       (15,778 )     -       3,282  
Cyrsa S.A. (4)
    1,750       11       -       -       (1,725 )     -       -       -       36  
Directors (3)
    2       155       -       -       -       -       (15,612 )     (20 )     (15,475 )
Elsztain Managing Partners Ltd (3)
    -       -       -       -       -       -       (53 )     -       (53 )
Elsztain Reality Partner Master Fund I (3)
    -       48       -       -       -       -       (584 )     -       (536 )
Elsztain Reality Partner Master Fund II (3)
    -       31       -       -       -       -       (275 )     -       (244 )
Elsztain Reality Partner Master Fund III (3)
    -       77       -       -       -       -       -       -       77  
Estudio Zang, Bergel y Viñes (3)
    -       9       -       -       (1,241 )     -       -       -       (1,232 )
Fundación IRSA (3)
    33       1       -       -       (1 )     -       -       -       33  
Futuros y Opciones.com S.A. (2)
    16       -       -       -       (8 )     -       -       -       8  
Hersha Hospitality Trust (2)
    -       2,690       -       -       -       -       -       -       2,690  
Irsa Developments LP (2)
    -       7       -       -       -       -       (4 )     -       3  
Real Estate Strategies LP (2)
    -       64       -       -       -       -       (8 )     -       56  
Lipstick Management LLC (2)
    -       448       -       -       -       -       -       -       448  
Museo de los Niños (3)
    1,781       -       -       -       (9 )     -       -       -       1,772  
New Lipstick LLC (2)
    -       960       -       -       -       -       (622 )     -       338  
Personnel loans (3)
    61       2,522       -       -       (146 )     -       (1,000 )     -       1,437  
Puerto Retiro S.A. (4)
    58       63       -       -       (5 )     -       -       -       116  
Quality Invest S.A (4)
    799       241       -       -       -       -       (16 )     -       1,024  
Tarshop S.A (2)
    660       13,715       -       -       (5,533 )     -       (17,330 )     -       (8,488 )
TGLT S.A (2)
    658       1,680       -       75,308       -       (2,345 )     -       -       75,301  
Totals as of June 30, 2011
    8,767       42,270       415       75,308       (9,905 )     (2,345 )     (51,286 )     (20 )     63,204  

 
- 34 -

 



NOTE 19:                      (Continued)

b.  
The Statement of Income balances for the six – month periods ended December 31, 2011 and 2010, held with related companies, persons and shareholders are as follows:

Related parties
 
Sale and
fees for services
   
Leases
   
Interest and exchange differences
   
Fees
   
Share services – salaries and bonuses
   
Donations
   
Totals
 
Canteras Natal Crespo S.A. (4)
    24       -       2       -       -       -       26  
Consorcio Libertador (3)
    61       7       -       -       -       -       68  
Consorcio Torre Boston (3)
    161       -       -       -       -       -       161  
Consultores Assets Management S.A. (3)
    -       59       -       -       -       -       59  
Cresud S.A.C.I.F. y A. (5)
    -       385       1,481       -       (32,838 )     -       (30,972 )
Cyrsa S.A. (4)
    -       4       -       -       -       -       4  
Directors (3)
    -       -       -       8,564       -       -       8,564  
Estudio Zang, Bergel y Viñes (3)
    -       -       -       211       -       -       211  
Fundación IRSA (3)
    -       -       -       -       -       (1,640 )     (1,640 )
Inversiones Financieras del Sur S.A. (3)
    -       -       71       -       -       -       71  
Tarshop S.A. (2)
    110       2,476       -       -       -       -       2,586  
Personnel Loans
    -       -       194       -       -       -       194  
Totals as of December 31, 2011
    356       2,931       1,748       8,775       (32,838 )     (1,640 )     (20,668 )

 
- 35 -

 



NOTE 19:                      (Continued)

b.  
(Continued)

Related parties
 
Sale and
fees for services
   
Leases
   
Cost of services
   
Interest and exchange differences
   
Fees
   
Share services – salaries and bonuses
   
Donations
   
Totals
 
Canteras Natal Crespo S.A. (4)
    24       -       -       2       -       -       -       26  
Consorcio Libertador  (3)
    61       6       -       -       -       -       -       67  
Consorcio Dock del Plata (3)
    78       -       -       -       -       -       -       78  
Consorcio Torre Boston (3)
    161       -       (2,966 )     -       -       -       -       (2,805 )
Consultores Assets Management S.A. (3)
    -       11       -       -       -       -       -       11  
Cresud S.A.C.I.F. y A. (5)
    -       339       -       (4,631 )     -       (27,670 )     -       (31,962 )
Cyrsa S.A. (4)
    -       4       -       -       -       -       -       4  
Directors (3)
    -       -       -       (3 )     (30,099 )     -       -       (30,102 )
Estudio Zang, Bergel y Viñes (3)
    -       -       -       -       (2,783 )     -       -       (2,783 )
Fundación IRSA (3)
    -       -       -       -       -       -       (1,526 )     (1,526 )
Tarshop S.A. (2)
    95       1,821       -       80       -       -       -       1,996  
Parque Arauco S.A. (1)
    -       -       -       (315 )     -       -       -       (315 )
Personnel Loans
    -       -       -       138       -       -       -       138  
Totals as of December 31, 2010
    419       2,181       (2,966 )     (4,729 )     (32,882 )     (27,670 )     (1,526 )     (67,173 )

(1)           Shareholders of Alto Palermo S.A.
(2)           Subsidiary (direct or indirect).
(3)           Related party.
(4)           Joint control.
(5)           Shareholders.



 
- 36 -

 



NOTE 20:
NATIONAL PARKS ADMINISTRATION DISPUTE

-  
Provision for unexpired claims against Llao Llao Holding S.A.

The Company Llao Llao Holding S.A. (“LLH”) predecessor of Llao Llao Resorts S.A. (“LLR”) as operator of the Llao Llao Hotel, was sued in 1997 by the National Parks Administration seeking collection of the unpaid balance of the additional sale price, in Argentine External Debt Bond (“EDB”) amounting to US$ 2.9 million. In March 2004, after different stages of judicial proceeding LLH paid Ps. 9,156 in cash and EDB.

Furthermore, the plaintiff requested to initiate an incidental procedure for execution of sentence by performing a settlement through the Ministry of Economy. After various judicial instances, such liquidation was approved. In April 2010, LLR paid Ps. 12,297 in cash and bonds, in addition to the Ps. 826 which had already been levied through an attachment. On December 28, 2011, the court settlement that cancels the amounts owed was ruled.
 
 
At the same time, the plaintiff stated that the deposited amounts were in line with the settlement that had taken place on June 30, 2007,and that was eventually approved in the framework of these proceedings on December 5, 2007. As a result, it argued that the interest accrued until actual payment was to be adjusted by application of the Argentine Central Bank’s borrowing interest rate. As estimated by the Argentine Agency of National Parks, the outstanding balance to be deposited by LLR would amount to US$ 659. As of December 31, 2011, the Company’s attorneys have estimated the contingency at Ps. 587. In addition, on September 22, 2010, the judge calculated that the fees payable to the auctioneer who took part in the proceedings amount to Ps. 1.8 million. LLR lodged an appeal against the award for considering the amount excessively high. The auctioneer, in turn, lodged his appeal against the award for considering the amount insufficient. After various judicial instances, the courts rendered a decision favorable to LLR and considered the debt related to interest settled.

Since LLR had a credit balance as regards the deposit made pursuant to settlement approved in the proceedings, on February 18, 2011 LLR filed a remedy for relief whereby it requested that the Court of Appeal issue a decision on the amount deposited in excess and order the eventual repayment to the defendant. The Court of Appeal ruled that the claim should be treated by the Court of original jurisdiction. Hence, the file was returned to the original Court. There, the auctioneer has requested payment of fees, which were decreased to Ps. 1.1 million plus VAT after LLR’s appeal was favorable. LLR presented a proposal to pay the auctioneer’s fees settled, which will be withheld from the funds seized, from the freely disposable funds (Ps. 826) and from the funds invested in time deposits in dollars. Likewise, LLR requested professional fees to be settled and resolution of the pending clarifying remedy as to the amount deposited in excess.

 
- 37 -

 



NOTE 20:                      (Continued)

As of the date these financial statements, the Company’s attorneys have informed that the fees were made available to be collected. The remaining balance will be used to pay incidental expenses until the court process finishes.

NOTE 21:
RESTRICTED ASSETS

A.  
IRSA Inversiones y Representaciones Sociedad Anónima

(i)       Puerto Retiro S.A.

On April 18, 2000, Puerto Retiro S.A. (indirect subsidiary of IRSA) was notified of a filing made by the National Government, through the Ministry of Defense, to extend the petition in bankruptcy of Inversora Dársena Norte S.A. (Indarsa) to Puerto Retiro S.A.. Concurrently with the complaint, at the request of plaintiff, the bankruptcy court granted an order restraining the ability of Puerto Retiro S.A. to sell or dispose in any manner the acquired real estate property from Tandanor S.A. in June 1993.

Indarsa had acquired 90% of the capital stock of Tandanor S.A. to a formerly estate owned company privatized in 1991, engaged in the shipyard industry.

Indarsa did not comply with the payment of the outstanding price for the acquisition of the stock of Tandanor, and therefore the Ministry of Defense requested the bankruptcy of Indarsa, pursuing to extend the bankruptcy to Puerto Retiro S.A.

The evidence steps of the legal procedures have been completed. Puerto Retiro S.A. appealed the precautionary measure, being the same confirmed by the Court  on December 14, 2000. The parties have submitted their claims in due time. The file was passed for the judge to issue a pronouncement, this being a decree adjourning the summoning of decisions to pronouncement in the understanding that there exists pre-judgment in respect of the penal cause filed against ex-officers of the Ministry of Defense and ex-directors of the Company. Consequently, the matter will not be solved until there is final judgment in penal jurisdiction.

Notice has been served upon the commercial court that the criminal cause of action was declared extinguished by operation of the statutes of limitation and that the accused were acquitted. However, this ruling was challenged by filing an appeal in cassation, which is why the other decision is still not final.

 
- 38 -

 



NOTE 21:                      (Continued)

 
A.
(Continued)

 
(i)
(Continued)

The Management and legal advisors of Puerto Retiro S.A. estimate that there are legal and technical issues to consider that the request for bankruptcy will be denied by the court. However, taking the particular characteristics into account and the progress of the legal action, this position cannot be considered conclusive.

 
(ii)
Loan of Hoteles Argentinos S.A.

In March 2005, Credit Suisse First Boston (“CSFB”) acquired a loan for US$ 11.1 million of Hoteles Argentinos S.A. (“HASA”), which had been in non-compliance since January 2002. In April 2006, HASA reduced the capital amount payable to US$ 6.0 million. The balance accrued a 6 months LIBOR interest rate plus 7.0% being the last of US$ 5.07 million due in March, 2010.

Jointly, a credit default swap was subscribed by the Company for 80% of the restructured debt value in order to protect CSFB in case of non-compliance with HASA’s obligations. As compensation, the Company received a coupon on a periodical basis. Additionally, the Company has deposited as guarantee the amount of US$ 1.2 million.

With the last installment of the loan received having been repaid on March 15, 2010, CSFB reimbursed the deposit to the Company. In connection with this matter, HASA borrowed a new loan from Standard Bank Argentina S.A., for a total amount of Ps. 19.0 million, which accrued interest at a fixed rate, payable on a quarterly basis.  The capital mature on March 15, 2011. On this date, HASA refinanced the mentioned loan agreement, as per the following detail: US$ 0.4 million at a fixed rate (capital plus interest) to be paid on September 12, 2012; US$ 0.4 million at a fixed rate (capital plus interest) to be paid on March 14, 2012 and Ps. 15.8 million at a fixed rate, with capital to be paid on March 14, 2012 and interests payable on a quarterly basis.

As a guarantee for this transaction, the Company entered into a put option agreement (Put Right) with Standard Bank Argentina S.A. whereby the Bank receives the right to sell to the Company, which in turn agrees to purchase, 80% of the credit rights arising from the loan in the event of HASA defaulted the loan.

As of the date of these financial statements, HASA had committed no event of default.

 
- 39 -

 



NOTE 21:                      (Continued)

 
A.
(Continued)

(iii)  
The company and subsidiaries have mortgages over the following properties:

Properties
 
Book value as of
December 31, 2011
 
Edificio República
    213,161  
Predio San Martín
    69,435  
Soleil Factory
    72,090  
Zetol plot of land
    33,289  
Vista al Muelle plot of land
    23,231  
Bariloche plots of land
    21,900  

 
(iv)  
New Lipstick LLC maintains a pledge over Metropolitan 885 Third Avenue Leasehold LLC’s shares.

 
(v)
To guarantee the compliance with all the covenants assumed by Liveck S.A., and the minority shareholder of Zetol S.A. and Vista al Muelle S.A., pursuant to the stock purchase agreement for Vista al Muelle S.A.’s shares executed on June 11, 2009 and the Addendums to such agreement as well as payment of any possible damages and associated expenses, the parties have reciprocally tendered a security interest consisting in a possessory pledge over the shares of Vista al Muelle S.A. and Zetol S.A..

 
(vi)
On December 28, 2011, 2,061,856 shares of Hersha Hospitality Trust were transferred to Citibank N.A. as collateral for the loan (see Note 13 (1) (h)).

 
B.  
Alto Palermo S.A. (APSA)

(i)  
On June 15, 2011, APSA granted in favor of Banco Hipotecario S.A. a pledge on the Company´s Class I Non-Convertible Notes issued on May 11, 2007, for a face value of US$ 1.2 million (See Note 22 B.3.).

(ii)  
On August 3, 2011, a mortgage was constituted on Soleil Factory (See Note 22 B.2.).

 
- 40 -

 



NOTE 21: (Continued)

 
B.
(Continued)

(iii)  
As mentioned in Note 24 B.5., to secure the fulfillment of the Concession Agreement with ADIF, Arcos del Gourmet S.A. committed itself to hire a surety bond of Ps. 4,460, make an escrow deposit in cash of Ps. 400 and to hire another surety bond in favor of ADIF as collateral to the execution of the works agreed in due time and proper form for Ps. 14,950. These surety bonds were hired during October 2011.

(iv)  
   As regards the case "Alto Palermo S.A. (APSA) with Dirección General Impositiva in re: Appeal", Case file No. 25,030-I, currently heard by Room A, Office of the 3rd Nomination, the property located at Av. Olegario Andrade 367, Caballito, Buenos Aires City has been encumbered, and its value as of December 31, 2011 amounts to Ps. 45,814 (disclosed in the "Non-current investments- Undeveloped plots of land”).


NOTE 22:   ACQUISITION, CONSTITUTION AND RESTRUCTURING OF BUSINESS AND PROPERTY

A.  
IRSA Inversiones y Representaciones Sociedad Anónima

 
1.
Creation of CYRSA - Horizons Project

In January 2007, the Company acquired two adjacent plots of land located in Vicente López, Province of Buenos Aires (one of them, through the purchase of Rummaala S.A., which was the owner of that plot of land and currently is merged with CYRSA S.A.). The purchase price was US$ 36.2 million of which US$ 30.3 million will be cancelled by handing over certain units of the building to be constructed. As security for this obligation, a pledge was constituted over the shares of Rummaala S.A. and a mortgage was constituted over the Company´s building Suipacha 652.

In April 2007, the Company constituted CYRSA S.A. (“CYRSA”) and in August 2007, CYRELA was incorporated with the ownership of 50% of CYRSA capital stock. The Company contributed the plots of land and the related liability in kind for a net value of Ps. 21,495 and CYRELA contributed Ps. 21,495 in cash.

Then, a major real estate development known as “Horizons” was launched on the two plots of land mentioned.

 
- 41 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
1.
(Continued)

From May 2008, CYRSA continued the marketing process of the building units to be constructed on the plot referred to above. Certain clients had made advances by means of signing preliminary sales contracts, reaching 100% of the units to be marketed, which are disclosed in “Customer advances”.

The sale price set forth in these preliminary sales contracts consist of a fixed and determined portion and another portion to be determined in line with the future construction expenses.

Each buyer chose from the following purchase plans:

 
-
The balance is cancelled in installments and is fully paid at the time of transfer signature of deeds or,

 
-
Partial cancellation will be on installments payable up to the time of transfer / signatures of deeds, the remaining balance to be financed during 90 months´ term with units having mortgaged guarantees.

As of December 31, 2011, the percentage of completion of the “Horizons” project was 99%. Three of the six towers included in the project have already been completed and are currently signing the title deeds.

 
2.
Acquisition of Hersha Hospitality Trust (“Hersha")

On August 4, 2009, the Company, through Real Estate Investment Group L.P. (REIG) acquired 5,700,000 shares representing approximately 10.4% of Hersha´s common stock and a call option that matures on August 4, 2014 to purchase an additional 5,700,000 shares at an exercise price of US$ 3.00 per share. Under the agreement, if starting on August 4, 2011 the quoted market price of Hersha´s share were to exceed US$ 5.00 per share during 20 consecutive trading sessions, Hersha may settle the call option by issuing and delivering a variable amount of shares to be determined in accordance with certain market values.

The total purchase price paid was US$ 14.3 million. As part of the agreement, the Company´s Chairman and CEO, Mr. Eduardo S. Elsztain, has been appointed to Hersha’s Board of Trustees.

 
- 42 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
2.
(Continued)

In January, March and October 2010, the Company through its subsidiaries purchased 11,606,542 additional shares of Hersha’s common stock, for an aggregate purchase price of US$ 47.9 million.

During fiscal year ended on June 30, 2011, the Company through its subsidiaries sold 2,542,379 common shares in Hersha, for a total of US$ 16.1 million, which resulted in approximately US$ 11.5 million gain.

As of December 31, 2011 the Company´s direct and indirect interest in Hersha amounts to 9.17%. If the call option was exercised and the Company´s interest was not diluted due to newly issued shares, the Company´s interest in Hersha would be 12.12%. The Company accounts for its investment in Hersha at cost while the call option has been accounted for its fair value.

Hersha is a Real Estate Investment Trust (REIT) listed in the New York Stock Exchange (NYSE) under the “HT” symbol that holds majority interests in 78 hotels throughout the United States of America totaling approximately 10,621 rooms. These hotels are rated as “select service” and “upscale hotels” and they are mainly located in the Northeast coast of the US, including New York, New Jersey, Boston, Washington D.C. and Philadelphia, whilst a few are located in northern California, Los Angeles and Arizona. These properties are operated under franchises that are leaders and enjoy widespread recognition in their markets, such as Marriot International, Intercontinental Hotel Group, Starwood Hotels, Hilton Hotels Corporation, Global Hyatt Corporation and Choice Hotels International.

 
3.
Acquisition of Lipstick Building, New York

In July 2008, the Company (through its subsidiaries) acquired a 30% interest in “Metropolitan 885 Third Avenue LLC” (“Metropolitan”), which main asset (through its subsidiaries) was a rental office building in New York City known as the “Lipstick Building” and the debt related to that asset. The transaction included the acquisition of (i) a put right exercisable until July 2011 to sell a 50% of the interest acquired at the same value paid plus interest at 4.5% per annum and (ii) a right of first offer to acquire a 60% portion of the 5% interest of the shareholding. The total price paid was US$ 22.6 million.

 
- 43 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
3.
(Continued)

During 2009 and in the context of the financial crisis and shrinkage of the real estate market in New York, Metropolitan incurred in significant losses, which resulted in negative equity mainly due to an impairment recognized in connection with the building. Since the Company’s share in Metropolitan’s losses exceeded its equity interest; the Company recognized a zero value on its investment and a liability of US$ 1.5 million which represented the Company’s maximum commitment to fund Metropolitan’s operations.

In December 2010, the negotiations geared towards restructuring the amounts owed under mortgage to Royal Bank of Canada came to a successful conclusion. The debt was reduced from US$ 210.0 million to US$ 130.0 million (excluding accrued interest) at a Libor plus 400 basic points rate, which may not exceed a maximum rate of 6.25% and with a maturity date fixed at seven years. The junior indebtedness to Goldman, Sachs & Co., which had amounted to US$ 45.0 million (excluding accrued interest), was cancelled through a US$ 2.25 million payment.

Metropolitan 885 Third Avenue Leasehold LLC (“Metropolitan Leasehold”) will maintain the existing ground leases in the same terms and conditions in which they had been initially agreed upon, for a remaining 66 years’ term. The final consent to this restructuring has already been tendered by all the parties concerned and the closing was consummated on December 30, 2010, as that is when the company New Lipstick LLC (“New Lipstick”), the new Metropolitan Leasehold holding company, made a US$ 15.0 million principal payment as repayment of the newly restructured mortgage debt, thus reducing it from US$ 130.0 million to US$ 115.0 million.

As a consequence of said closing, the Company has indirectly – through New Lipstick – increased its equity interest in the Lipstick Building to 49%. This increase originated in a US$ 15.3 million capital contribution and in the fact that the put option for 50% of the shareholding initially acquired in Metropolitan, which had amounted to approximately US$ 11.3 million plus accrued interest, has been rendered ineffectual. Besides, the above-mentioned commitment, for US$ 1.5 million, ceased to be in effect.

 
- 44 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
4.
Acquisition of shares in Banco Hipotecario S.A.

During the last fiscal years, the Company has been conducting various purchase and sale transactions of BHSA shares, as a result of which, as of December 31, 2011, the Company´s ownership interest in BHSA is 29.77% of BHSA´s capital stock (without considering treasury shares).

 
5.
Acquisition of companies in the Oriental Republic of Uruguay

During the fiscal year ended on June 30, 2009, the Company (through Tyrus) acquired by a minimum payment a 100% ownership interest in Liveck S.A. (Liveck), a company organized under the laws of the Oriental Republic of Uruguay. Later, the Company sold 50% of its interest in Liveck to Cyrela Brazil Realty S.A. for an amount of US$ 1.3 million.

Simultaneously, Liveck acquired a 90% interest over the shares of the companies Zetol S.A. (Zetol) and Vista al Muelle S.A. (Vista al Muelle), both property owners in Uruguay’s Canelones Department. The remaining 10% ownership interest in the capital stock of both companies is held by Banzey S.A. (Banzey).

The total price of the purchase of all the shares in Zetol had been fixed at US$ 7.0 million, of which US$ 2.0 million have already been paid, the outstanding balance is to be paid in 5 installments of US$ 1.0 million each plus an annual 3.5% compensatory interest rate calculated on the total outstanding amount and tied to the consummation of the release to the market of the real estate projects or within a maximum term of 93 months counted as from the date of acquisition of the Company. The sellers of the shares of Zetol may choose to receive, in lieu of the amounts outstanding in cash (principal plus interest), the ownership rights to the units to be built in the real estate owned by Zetol representative of 12% of the total marketable square meters built.

The price for the purchase and sale of all the shares in Vista al Muelle amounted to US$ 0.83 million, and accrued an annual 8% compensatory interest rate on the outstanding amounts. As of September 10, 2010, it was completely paid.

To guarantee compliance with the duties agreed by Liveck in the above transactions, Ritelco S.A. has tendered a surety bond guaranteeing payment of 45% of the outstanding balance, interest thereon and the option rights of the sellers.

 
- 45 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
5.
(Continued)

In the framework of the agreement for the purchase and sale of Zetol and Vista al Muelle and their respective addenda, Liveck has agreed to buy the shares held by Banzey (or Ernesto Kimelman or a company owned by Ernesto Kimelman as the case may be), of Vista al Muelle and Zetol and the latter have agreed to sell them, in exchange for the amount of US Dollars or Uruguayan Pesos, as the case may be, that Ernesto Kimelman or Banzey or a company owned by Ernesto Kimelman (as applicable), would have actually contributed to Zetol and Vista al Muelle, until the execution of said purchase and sale.

The parties have agreed that the obligations mentioned above are dependent upon, and shall be rendered ineffectual if the parties entered into a shareholder agreement no later than July 1, 2011. If no such shareholder agreement is signed, this sale shall be executed and delivered on July 11, 2011.

On the balance sheet date, having failed to execute the shareholders' agreement or to sign an agreement to extend the term for such execution, the parties have not expressed their intention to perform the obligations assumed under the agreement to purchase the stock of Vista al Muelle S.A. and Zetol S.A.

The Company and its shareholders intend to develop an urban project that will consist in the construction of apartment buildings to be subsequently sold. The project has already been conferred the “Urban Feasibility” status by Canelones’ Mayor’s Office and its Legislative Council.

In view of the additional development capacity granted by the IMC, the companies agree to pay maximum the sum of US$ 8.1 million for all concepts solely with works and other services as consideration thereof. The works to be carried out in consideration thereof are described in the Contract Plan.

Furthermore, the companies may exercise an option included in the agreement that entitles them to a 15% reduction of the total consideration amount, provided 80% of such consideration has been already been performed with a term of four years as from execution of the Contract Plan.

On the other hand, it states that if the companies do not build the square meters of additional development capacity granted to them, the total consideration amount will also be reduced proportionately as the parties agree.


 
- 46 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
5.
(Continued)

In December 2009, Vista al Muelle acquired other properties totaling US$ 2.7 million in exchange for a US$ 0.3 million down payment, with the balance to be cancelled through the delivery of home units and/or stores to be built and equivalent to 12% out of 65.54% of the sum of the prices of all of the units covered by the Launching Price List for Sector B (the parties have already signed a plat of subdivision to this end).

In February 2010, it acquired additional real estate for a total of US$ 1.0 million in exchange for a down payment of US$ 0.15 million with the balance to be paid in 3 consecutive and equal installments maturing on December 31, 2011, June 30, 2013 and December 31, 2014 and accruing an annual 3% interest rate on the outstanding balance, payable quarterly and on arrears as from December 31, 2009.

On December 17, 2010, the Company and Cyrela signed a stock purchase agreement whereby a 50% interest in Liveck’s capital stock was reacquired from Cyrela for US$ 2.7 million. This amount is equivalent to the contributions made in Liveck by Cyrela. Therefore, the Company’s interest in Liveck amounted to 100% (through Tyrus).

As part of the agreement, the Company agreed to hold Cyrela harmless in the event of claims asserted by Zetol’s sellers. Besides, if within a term of 24 months as from the date of the agreement Cyrela were not released from the guarantee tendered in favor of the above-mentioned sellers, the Company will be obliged to post a new guarantee in favor of Cyrela, equivalent to 45% of the price balance, interest thereon and the option rights to which Zetol’s sellers are entitled.

 
6.
Acquisition of a building located at 183 Madison Avenue, New York, NY

On August 26, 2010, the Company together with some U.S. partners, executed an acquisition of a real estate property located at 183 Madison Avenue, New York, NY, through Rigby 183 LLC (“Rigby 183”).

The transaction was closed on December 15, 2010 and the price paid by Rigby 183 was US$ 85.1 million, such payment has been structured through a financing of US$ 40.0 million obtained by Rigby 183 and the sum of US$ 45.1 million paid in cash. Moreover, Rigby 183 has obtained an additional financing of US$ 10.0 million, in order to perform refurbishments and improvements on the building, which is being disbursed as works progress.

 
- 47 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
6.
(Continued)

On March 31, 2011, the Company sold 8% of its interest in Rigby 183, owned by Real Estate Strategies LLC (“RES”), a company indirectly controlled through Tyrus, in the amount of US$ 3.8 million. As a result, the Company has a 49% interest in Rigby 183 through IMadison LLC (“IMadison”).

The building is located in a Manhattan area known as “Midtown South”, at the intersection of Madison Avenue and 34th Street.

There are several landmark buildings in the area, such as the Empire State Building, Macy´s Herald Square and Madison Square Garden. This commercial property will be used for rentals of office space and retail stores in the lower part of its 18 stories. Its net leasable area is approximately 22,000 square meters. Based on what has already been discussed, the implicit value per square meter acquired has been US$ 3,717.

 
7.
Acquisition of facilities located in San Martín

On March 31, 2011, Quality subscribed a Contract for the Purchase and Sale of Property of an industrial plant owned by Nobleza Piccardo S.A.I.C. y F. ( “Nobleza”) located in San Martín, Province of Buenos Aires. The facilities have the necessary features and scales for multiple uses. On May 31, 2011, the deed was executed.

The purchase price was agreed on US$ 33 million, and payment was made as per the following detail: US$ 9.9 million have already been paid, and the balance of US$ 23.1 million, plus interests at a 7.5% nominal annual rate calculated on outstanding balances, will be cancelled in three equal and consecutive annual installments. The first installment is due to be paid on May 31, 2012. In guarantee, Quality constituted in favor of Nobleza a first-grade privilege mortgage on the real estate.

Likewise, Quality subscribed a lease agreement with Nobleza, by means of which the latter will continue occupying the property for a maximum term of three years, with the purpose of gradually moving the plant, its main distribution center and the administrative offices to another site.

 
- 48 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
7.
(Continued)

On April 11, 2011, Quality requested the National Antitrust Commission ("CNDC") to issue an advisory opinion on the obligation to notify the operation or not. The CNDC stated that there was an obligation to notify the situation, but Quality filed an appeal against this decision. As of the date these financial statements are issued, the resolution of the appeal is pending.

 
8.
Acquisition of Bitania 26 S.A.´s shares

On December 12, 2011, Ritelco S.A. purchased 9,800,000 non-transferable nominative common shares, of one vote each, issued by the company Bitania 26 S.A., representative of 49% of its capital stock. Bitania 26 S.A. owns the hotel “Esplendor Savoy” in the city of Rosario. The amount of the transaction was set in US$ 5.0 million, which has been settled as of December 31, 2011.

 
9.
Supertel Hospitality Inc. (“Supertel”)

On November 16, 2011, the Company informed that Real Estate Strategies L.P. (“RES”), an investment company managed and controlled by the Company, signed a purchase agreement of Supertel’s shares, subject to the approval of Supertel’s shareholders and to RES’s satisfaction with the restructuring of certain debt of Supertel.

In case the conditions described above are met, RES will invest US$ 20.0 million in return for 2 million preferred shares to be issued by Supertel. The investment will also include a purchase option to acquire up to a maximum of 1 million of preferred shares at US$ 10 each.

The mentioned preferred shares will accrue a preferred dividend of 6.25% per annum and will grant, subject to certain limitations, the same politic rights as those of the common shares. Additionally, subject to certain limitations, they will be convertible into Supertel’s common shares, at a rate of ten shares per preferred share, for a five-year term.


 
- 49 -

 



NOTE 22:
(Continued)

 
A.
(Continued)

 
9.
(Continued)

As part of the agreement, RES will also receive warrants to purchase 20 million of common shares, which can increase up to 30 million, in case RES exercises the option for the additional preferred shares. Subject to certain limitations, these warrants can be exercised at any time at a price of US$ 1.20 per share, within a five-year term after the transaction is closed.

The Company, by means of RES, communicated to Supertel that it will increase its interest by exercising the above mentioned option to purchase 1 million of additional preferred shares at a price of US$ 10.0 million.

The issuing and sale of the preferred shares was subject to the approval of Supertel’s Shareholders’ Special Meeting, which took place on January 31, 2012.

In such Special Meeting, Supertel’s Shareholders, through the required voting, approved the issuing and sale of up to 3 million of preferred shares, 30 million of common shares which can be issued when the preferred shares are converted, and the issuing of the warrants to purchase up to 30 million of additional common shares, in favor of RES, as per the purchase agreement.

On February 1st, 2012, Supertel issued and sold 2.1 million of preferred shares to RES for US$ 21.0 million. Likewise, the parties expect the transaction regarding the 0.9 million of remaining shares to be completed soon.

B.  
Alto Palermo S.A.

1.  
Acquisition of Arcos del Gourmet S.A.´s shares

On November 27, 2009, APSA acquired 7,916,488 shares of common stock with a face value of Ps. 1 each, entitled to 1 vote per share, representing 80% of the capital stock of Arcos del Gourmet S.A. The price was established at fixed amount of US$ 5.14 million plus a variable amount equal to the 20% of the investment required in order to develop the project, up to a maximum of US$ 6.9 million.

 
- 50 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
1.
(Continued)

On September 7, 2011, APSA acquired additional shares which represent 8.185% of the voting capital in the amount of US$ 1.75 million. Furthermore, it agreed to modify the variable price of shares acquired in 2009 by setting it at 10% of any capital increase made in Arcos de Gourmet S.A., which of the issuance date of these financial statements constitutes the remaining balance. The above is recognized at its present value and is disclosed in the accounts Short and Long-term Debt.

 
2.
Acquisition of a commercial center goodwill

On December 28, 2007, APSA signed an Agreement for Partial Transfer of Goodwill with INC S.A. for acquiring one of the parts of the goodwill established by a commercial center where “Soleil Factory” currently develops activities.

On July 1st, 2010, APSA and INC S.A. executed the definitive instrument for the partial transfer of the goodwill and memorandum of closure by which INC S.A. transferred the goodwill of the commercial center; becoming operational on such date. Guidelines provided that INC S.A. did not transfer APSA its receivables or its payables from the part of the goodwill transferred originated before executing the final agreement. It should be noted that the goodwill and the building related to the hypermarket transaction located on the same premises were excluded from the transaction.

On April 12, 2011, the National Antitrust Commission notified APSA of its authorization of this transaction.

On August 3, 2011, INC S.A. granted to APSA the conveyance deed of the property.

The total price for this transaction was US$ 20.7 million of which, US$ 7.1 million were paid at the time of subscription of the purchase agreement, US$ 1 million at the time of recording the public deed, and the balance of US$ 12.6 million accrues an annual interest rate of 5% plus VAT. The interest will be repaid in seven annual and consecutive installments having matured the first installment on July 1, 2011. The capital will be settled with the last interest installment.

 
- 51 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
2.
(Continued)

Additionally, APSA granted a first-grade privilege mortgage on the property in favor of INC S.A. to secure payment of the balance plus interest to be accrued up to the effective payment date.

The above is disclosed in the accounts Short and Long-term Debt for its net present value.

Furthermore, APSA has signed an offering letter for acquiring, building and running a commercial center in a real estate owned by INC S.A., located in the City of San Miguel de Tucumán, Province of Tucumán. The price of this transaction is US$ 1.3 million, of which US$ 0.05 million were paid on January 2, 2008. Such disbursement was recorded suppliers advances. This transaction was subject to certain conditions precedent, among which APSA should acquire from INC S.A. the goodwill constituted by the commercial center operating in Soleil Factory.

Having complied with such condition on July 1, 2010, APSA shall start the works on May 2, 2011. However, before starting with the works, INC S.A. should have: a) granted the title deeds to APSA's future units to APSA, and b) transferred to APSA the rights to the registered architectural project and the effective permits and authorizations to be carried out in APSA's future units. As of the date of issuance of these unaudited financial statements, any of the two conditions have been fulfilled.

 
3.
Sale of equity interest in Tarshop S.A.

On October 30, 2009, Tarshop S.A. capitalized capital contributions made by APSA increasing the Company’s interest in Tarshop S.A. to 98.5878%.

During January 2010, APSA acquired the remaining minority interest (1.4122%) in Tarshop S.A. for US$ 0.54 million, reaching the 100% of the shareholding.

On December 22, 2009, APSA reported the approval by its Board of Director the sale, assignment and transfer on behalf of Banco Hipotecario S.A. the amount of 107,037,152 registered nonendorsable shares of common stock with a face value of Ps. 1 each and entitled to one vote per share, representing 80% of the Tarshop S.A. shares.

 
- 52 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
3.
(Continued)

In this line of thought, on December 29, 2009, contractual documents related to the transaction were executed, which was subject to the approval by the Argentine Central Bank granted on August 30, 2010. Consequently, on September 13, 2010, the respective memorandum of closure was executed. The total price paid for the purchase of shares stood at US$ 26.8 million. Under this transaction, APSA granted Banco Hipotecario S.A. a security agreement over its own Series I Notes, issued on May 11, 2007, for a face value of Ps. 1.2 million, which will work as guarantee upon any price adjustment that may result in favor of Banco Hipotecario S.A. as provided by the purchase agreement.

On October 11, 2011 Banco Hipotecario released 50% of the pledged Non-Convertible Notes and the remaining 50% would be released after two years as from the date appearing on the Closing Minute.

In compliance with the conditions defined in the agreement in question, APSA committed itself to not competing for 5 years in the credit card and/or consumer loan business in which Tarshop S.A. has a presence.

Additionally, under this transaction, receivables and payables between APSA and Tarshop S.A. have been compensated.

 
4.
Acquisition of the building known as Ex-Escuela Gobernador Vicente de Olmos (City of Córdoba)

On November 20, 2006, APSA acquired the building known as Edificio Ex-Escuela Gobernador Vicente de Olmos (Patio Olmos), located in the city of Córdoba through a public bidding in the amount of Ps. 32,522.

The building is under a concession agreement effective for 40 years, falling due in February 2032, which grants the concession holder the commercial exploitation of the property. Such agreement provides for paying a staggered fee in favor of the concession principal which shall be increased by Ps. 2.5 every 47 months. As of the issuance date of these unaudited financial statements, the concession is at the 238 month, with a current monthly fee of Ps. 15.1 while the next increase is scheduled for the 281 month.

 
- 53 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
4.
(Continued)

On September 25, 2007, the transfer deed for the building was signed with the Government of the Province of Córdoba and the transference of the respective concession contract.

Afterwards, the government of the Province of Córdoba declared the property to be of public use and subject to partial expropriation in order to be used exclusively for the Libertador San Martin theater. APSA has answered a complaint in an action and to challenge the law that declared such public interest on unconstitutional grounds. In the alternative, it has challenged the appraisal made by the plaintiff and, additionally, it has claimed damages not included in the appraisal and resulting immediately and directly from expropriation.

APSA has recorded this transaction as non-current investments.

 
5.
Barter transaction agreements

On October 11, 2007, APSA subscribed with Condominios del Alto S.A. a barter contract in connection with an own plot of land, Plot 2G, located in the City of Rosario, Province of Santa Fe.

As partial consideration for such barter, Condominios del Alto S.A. agreed to transfer the full property, possession and dominium in favor of APSA of the following future real estate: (i) fifteen (15) functional housing units (apartments), with an own constructed surface of 1,504.45 square meters, which represent and will further represent jointly 14.85% of the own covered square meters of housing units (apartments) of the real estate that Condominios  del  Alto S.A. will  build in Plot G, and (ii) fifteen (15) parking spaces, which represent and will further represent jointly 15% of the own covered square meters of parking spaces in the same building.

On March 17, 2010, APSA and Condominios del Alto S.A. subscribed a supplementary deed specifically determining the units committed for bartering that will be transferred to APSA and the ownership title to 15 parking spaces.

The parties have determined the value of each undertaking in the amount of US$ 1.1 million.

 
- 54 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
5.
(Continued)

On December 28, 2011, APSA and Condominios del Alto S.A. signed a deed by means of which Condominios del Alto S.A. transferred the units committed in favor of APSA, thus settling the consideration to be fulfilled by Condominios del Alto S.A.

APSA also granted Condominios de Alto S.A. an acquisition option through barter of plot 2 H. On November 27, 2008, the title deed for the plot of land 2 H was executed for US$ 2.3 million, a value that the parties have determined for each of their considerations.

As partial consideration for the above mentioned barter, Condominios del Alto S.A. agreed to transfer the full property, possession and ownership in favor of APSA of the following future real estate: (i) forty two (42) functional housing units (apartments), which represent and will further represent jointly 22% of the own covered square meters of housing (apartments) of the building that Condominios del Alto S.A. will construct in Plot H; and (ii) forty seven (47) parking spaces, which represent and will further represent jointly 22% of the own covered square meters of parking spaces in the same building.

On April 14, 2011, APSA and Condominios del Alto S.A. subscribed a supplementary deed which specifies the functional housing units (apartments) that were compromised in the barter transaction agreement that should be transferred to APSA and the ownership title of the forty five (45) parking spaces and five (5) storage spaces.

 
6.
Beruti plot of land

On October 13, 2010, TGLT S.A. and APSA subscribed an agreement of purchase by which APSA sells a plot of land located on Beruti 3351/59. The transaction was agreed upon at US$ 18.8 million. TGLT plans to construct a department building with residential and commercial parking. In consideration, TGLT S.A.. commits to transferring APSA: (i) a number to be determined of departments representing altogether 17.33% of proprietary square meters that may be sellable in departments in the building to be constructed; (ii) a number to be determined of complementary/functional parking units representing altogether 15.82% of square meters in parking in the same building; (iii) all units earmarked for commercial parking and (iv) the amount of US$ 10.7 million payable upon granting the title deed. This amount has been settled as of the date of these Unaudited consolidated financial statements.

 
- 55 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
6.
(Continued)

In compliance with what was agreed upon in the previously mentioned agreement of sale, on December 16, 2010, it was executed the title deed by which APSA transfer the entire ownership and title to TGLT S.A. to the previously mentioned plot of land.  TGLT constituted in favor of APSA a mortgage on the real estate, as collateral for the fulfillment of the obligations assumed in the title deed.

The above is disclosed in the accounts inventory and fixed assets, in the line Units to be received Beruti.

On June 9, 2011, the Administrative and Tax Contentious Law Court No. 9 of the City of Buenos Aires issued a precautionary measure in the lawsuit “Asociación Amigos Alto Palermo vs. the Government of the City of Buenos Aires for Amparo (remedy for legal protection against violation of rights)”, which ruled the suspension of the works.

On July 4, 2011, the Government of the City of Buenos Aires complied with what was required. On July 11, 2011, the hearing judge granted the injunction requested. Such injunction was temporarily granted until the parties produce all of the evidence offered and such evidence as may be requested by the Court at the adequate time.

TGLT S.A. and APSA filed appeals against the resolution that ruled the cautionary measure to suspend the works. These appeals are pending to be solved.

 
7.
Barter with CYRSA S.A.

On July 31, 2008, a conditioned barter commitment was executed by which APSA would transfer CYRSA 112 parking spaces and the rights to increase the height of the property to build two tower buildings on the air space COTO.

On December 17, 2010, APSA and CYRSA signed an agreement in order to finish the barter agreement.

 
- 56 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
8.
Paraná plot of land

On June 30, 2009, APSA subscribed a Letter of Intent by which it stated its intention to acquire from Wal-Mart Argentina S.A. a plot of land of about 10,022 square meters located in Paraná, Province of Entre Ríos, to be used to build, develop and exploit a shopping center or mall.

On August 12, 2010, the agreement of purchase was executed. The purchase price stood at US$ 0.5 million to be paid as follows:
i)  
US$ 0.05 million was settled as prepayment on July 14, 2009,
ii)  
US$ 0.1 million was settled upon executing such agreement, and
iii)  
US$ 0.35 million will be paid upon executing the title deed.

On December 29, 2011, possession of the real estate was granted, and a minute was signed in which the parties agreed that the deed transferring ownership will be granted on June 30, 2012, or within sixty (60) consecutive days as from the date in which the selling party evidences with a certified copy before the buying party that the real estate is not subject to any encumbrance, burden, limit or restriction to the ownership, except for the electroduct administrative easement in favor of EDEER S.A.

The real estate is disclosed under the fixed assets line item.

9.  
Acquisition of Nuevo Puerto Santa Fe S.A.´s shares

On June 15, 2011, APSA, by itself and through its controlled affiliate Torodur S.A. (buyers) (see Note 16.4. to the Unaudited Basic Financial Statements), acquired from Boldt S.A. and Inverama S.A. (sellers) a fifty per cent (50%) stake in the shares of Nuevo Puerto Santa Fe S.A. (NPSF), a company that is lessee of a property built and operated as a shopping center (La Ribera) in the port of the city of Santa Fe, Province of Santa Fe.

The purchase price payable for this acquisition of a 50% stake amounts to US$ 4.5 million payable over 19 monthly non-interest bearing installments, the latter installment being payable on February 2013. This debt is disclosed at its net present value under the Short and long term debt line item.

 
- 57 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
9.
(Continued)

Additionally, the purchasers will pay to the sellers, proportionally to the shares purchased, fifty (50%) of the working capital calculated on the purchase agreement, which will stem from the special closing financial statements of NPSF. The latter will prepare them as a supplement to the price.

The purchase of shares of NPSF was contingent upon the approval by the Regulatory Entity of the Port of Santa Fe of the share composition of NPSF provided, in addition, that the Caja de Asistencia Social Lotería de Santa Fe would not raise any challenge against the transaction.

As of August 18, 2011, once this condition was met the actual transfer of shares was completed. APSA and Torodur became owner of 33.33% and 16.66% of the capital stock respectively, which together represent 50% of the voting capital of NPSF. Likewise GRAINCO S.A. owns the remaining of 50% of the capital stock. Furthermore, NPSF and Casino Puerto de Santa Fe entered into a sublease agreement which replaces the previous lease agreement originally held by NPSF.

10.  
Sale of properties

Rosario plot of land

APSA has subscribed the following acceptance offers for the plot of land of the building located in the District of Rosario, City of Rosario, Province of Santa Fe:

Lots
 
Offer acceptance date
 
Agreed price
(in thousands of US$)
   
Collected amount
12/31/11
 (in thousands of US$)
 
Title deed´s date
  2 A
04/14/10
    4,200       4,200  
05/26/11
  2 E
05/03/10
    1,430       1,430  
09/29/10
  2 F
11/10/10
    1,931       1,931  
07/06/11
  2 B
12/03/10
    1,507       1,507  
08/11/11
  2 C
12/03/10
    1,507       1,507  
08/11/11
  2 D
12/03/10
    1,539       1,026  
-

The lots subject to these transactions have been recorded to the Inventories account.

 
- 58 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

11.  
 APSAMEDIA S.A.´s operations (formerly Metroshop S.A., which changed its legal name)

On May 21, 2010, APSA and Tarshop S.A. executed an agreement to formalize the transfer of shares by which Tarshop S.A. sold to APSA 18,400,000 registered non-endorsable shares of common stock with a face value of Ps. 1 each and entitled to 1 vote per Class "A” share representing 50% of Metroshop S.A.'s capital stock.

On January 13, 2011, APSA and Metronec S.A. executed a share purchase agreement by which Metronec S.A. has sold to APSA 18,400,000 registered non-endorsable shares of common stock with a face value of Ps. 1 each and entitled to 1 vote per Class "B” share representing 50% of APSAMEDIA S.A.'s capital stock.

As an action subsequent to the taking over, APSAMEDIA made two offers to Tarshop S.A., later accepted by Tarshop S.A., to grant the following assets:

 
i)  
Receivables from consumption transactions carried out through December 31, 2010 and that are performing or in default for not more than 60 days (both those in Metroshop S.A.’s own portfolio and those assigned to Fideicomiso Financiero Metroshop S.A. Serie XV- previous return of them).
 
ii)  
The contractual position in the credit card issuance agreements whose customers did not have as of December 31, 2010 a default for over 60 days in complying with their obligations.
 
iii)  
All credit card customers or accounts and consumer loans.
 
iv)  
Lease agreements on certain branches and their personal property.
 
v)  
Labor agreements for payroll personnel.

Finally, on April 18, 2011, APSA transferred to Fibesa S.A. (APSA´s subsidiary) 1,840,000 shares, representative of 5% of APSAMEDIA S.A.’s capital stock for a total amount of Ps. 0.8 million, which has been canceled as of the date of these unaudited financial statements.

 
- 59 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

 
11.
(Continued)

On July 20, 2011, the Special General Shareholders Meeting held by unanimous consent of Metroshop S.A. approved the change of corporate name to APSAMEDIA S.A. and the amendment of its corporate purpose to capitalize on market opportunities. APSAMEDIA S.A. will continue providing its services, which have been broadened in scope:

-  
Consumer credit marketing and financing.
-  
Issuance and marketing of credit cards.
-  
Performance of any type of agency and representation.
-  
Management of administrative, advertising and commercial activities.

Such amendments were registered with the Inspección General de Justicia (Corporate Record Office) on August 29, 2011, under number 17,795.

As of December 31, 2011, APSA´s direct and indirect interest in APSAMEDIA S.A. amounted to 100%.

On October 7, 2011, APSAMEDIA, as trustor, together with Comafi Fiduciario Financiero S.A., acting as Trustee of the “Fideicomiso Financiero Privado Yatasto”, as Original Holder, created a private financial trust called "Consumo Centro", which was assigned by APSAMEDIA under trust the legal ownership of certain receivables that were not in good standing, including consumer loans, credit card receivables and refinanced receivables generated by APSAMEDIA in the ordinary course of business, and which shall issue pass-through in favor of the Original Holder. Receivables assigned to the trust amount to Ps. 39.1 million approximately, which were reserved.  APSAMEDIA will assume no liability whatsoever for the creditworthiness or repayment capacity of any of the debtors, or for the success or failure to collect such receivables, or for compliance by debtors of obligations assumed in relation to such receivables.

The price of the Assignment in Trust amounts to Ps. 1.9 million. Such price less the sums of money received as payment by APSAMEDIA between August 26, 2011, cutoff date, and on October 7, 2011, which amount to Ps. 0.15 million were transferred to a pesos-denominated checking account held by APSA at Banco Comafi for a total amount of Ps. 1.8 million.

 
- 60 -

 



NOTE 22:
(Continued)

 
B.
(Continued)

12.  
Purchase of TGLT S.A.’s shares

On November 4, 2010, APSA acquired 5,214,662 registered, non-endorsable shares of common stock, entitled to one vote per share, issued by the Company TGLT S.A. for a total amount equivalent to Ps. 47.1 million under the initial public offering of the latter.

Thereafter, during fiscal year 2011, APSA acquired 1,017,284 additional shares for a total consideration of Ps. 9.2 million, representing 8.87% of the TGLT S.A. shares at the end of that year.

During the six month period ended December 31, 2011, APSA acquired 262,927 additional shares for a total amount of Ps. 2.6 million, thus reaching together with the Company’s interest to 9.25 % of the capital stock of TGLT S.A. at the end of the period.



NOTE 23:                   CAPITAL STOCK AND CONVERTIBLE AND NON COVERTIBLE NOTES PROGRAM

A.  
Alto Palermo S.A.

1.     Issuance of convertible notes.

On July 19, 2002, APSA issued Series I of Convertible Notes (“ONC”) for up to US$ 50 million with a face value of Ps. 0.1 each, maturing on July 19, 2014.

Convertible Notes accrued interest at a fixed nominal rate of 10% per annum. Interest is payable semi-annually. They can be converted at any time by choice of each Corporate Noteholder into common shares at a conversion price which is the higher of: (i) the result of dividing the Company’s shares face value (Ps. 0.1) by the exchange rate, and (ii) US$ 0.0324, which means that each Convertible Corporate Note can be turned into 30.864 shares of Ps. 0.1 face value. The shares underlying the conversion of the notes will be entitled to the same right to collect any dividends to be declared after the conversion as the shares outstanding at the time of the conversion.

 
- 61 -

 



NOTE 23:
(Continued)

A.  
(Continued)

 
1.
(Continued)

This issuance was resolved at the Ordinary and Extraordinary Meeting of Shareholders held on December 4, 2001, approved by the National Securities Commission Resolution No. 14,196 dated March 15, 2002 and authorized to list for trading on the Buenos Aires Stock Exchange on July 8, 2002.

On October 7, 2010, holders of Convertible Notes for a face value of US$ 15.5 million exercised their conversion rights. Consequently, the Company issued 477,544,197 shares of common stock with a face value of Ps. 0.1 each. As from the conversion and issuing of the shares, common stock of APSA increased from 782,064,214 to 1,259,608,411 shares.

Additionally, on September 21, 2011, a Convertible Corporate Noteholder exercised his conversion right. Thus, the Company issued 277,777 common shares of Ps. 0.1 face value each. After the conversion and issue of the shares, the Company’s capital stock increased from 1,259,608,411 to 1,259,886,188 common shares. Therefore, as from the program issuing date until December 31, 2011, the Convertible Corporate Noteholders have exercised their right to convert in APSA common shares for a total amount of US$ 18.3 million.

As of December 31, 2011, APSA’s Convertible Notes amounts to US$ 31.7 million, mainly held by the Company. (See Note 23 A.3.).

On May 26, 2011 APSA has made an offer to repurchase them, subject to certain conditions (See Note 23 A.3.).

 
- 62 -

 



NOTE 23:
(Continued)

A.  
(Continued)

 
2.
Issuance of notes

On May 11, 2007, APSA issued two new series of Non-Convertible notes for a total amount of US$ 170 million. These issuances are included within the Global Issuance Program of Non-Convertible notes, for a face value of up to US$ 200 million authorized by the National Securities Commission (CNV) by means of Resolution No. 15,614 dated April 19, 2007. The APSA´s Ordinary and Extraordinary General Shareholders’ Meeting held on October 29, 2009 approved the increase in the amount of the Global Issuance Program of Non-Convertible notes in place up to US$ 200 million, reaching a total amount of US$ 400 million.

Series I relates to the issuance of US$ 120 million, capital maturing on May 11, 2017, which accrue interest at a fixed interest rate of 7.875% paid semiannually on May 11 and November 11 of each year as from November 11, 2007.

On June 15, 2011, APSA granted in favor of Banco Hipotecario S.A. a pledge on its Series I Non-Convertible notes Corporate Notes issued on May 11, 2007, for a face value of US$ 1.2 million.

Series II relates to the issuance of Ps. 154 million (equivalent to US$ 50 million). Principal will be settled in seven, equal and consecutive semiannual installments as from June 11, 2009, and accrues interest at 11% per annum, maturing on June 11 and December 11 of each year as from December 11, 2007.

On April 18, 2011 APSA acquired from Cresud S.A.C.I.F. y A., the Company´s parent company, Non-Convertible notes Series I due in 2017 for a face value of US$ 5 million at a price of US$ 5.1 million, which resulted from averaging the prices quoted by three banks plus accrued interest until settlement of the transaction. As of December 31, 2011, total Series I and Series II Non-Convertible notes repurchased by APSA amount to US$ 10.0 million and US$ 1.4 million, respectively. Such Non-Convertible notes have been valued at face value and are disclosed netting the current and non-current capital and interest owed.

 
- 63 -

 



NOTE 23:
(Continued)

A.  
(Continued)

 
2.
(Continued)

As of December 31, 2011, the Company holds Corporate Notes Series II in the nominal amount of Ps. 13.3 million.

Additionally, under such Global Issuance Program of Non-Convertible Notes, on November 10, 2009, the placement of the two new Series of Non-Convertible Notes for a total value of Ps. 80.7 million was completed.

Series III relates to the issuance of Ps. 55.8 million, which matured on May 12, 2011 and accrued interest at variable Badlar rate plus a 3 % payable on a quarterly basis. On May 12, 2011, APSA made the last payment of interest and paid off all of the principal of the series referred above.

Series IV relates to the issuance of Ps. 24.9 million (equivalent to US$ 6.6 million), which matured on May 12, 2011 and accrued interest at a fixed rate of 6.75 %, payable on a quarterly basis. On May 12, 2011, APSA made the last payment of interest and paid off all of the principal of the series referred above.

The APSA´s Ordinary and Extraordinary General Shareholders’ Meeting held on October 29, 2009 approved the creation of a Global Program for the issuance of securities representing short-term debt (up to one year term) in the form of simple notes not convertible into shares, denominated in pesos, US dollars or any other currency with unsecured, special, floating and/or any other guarantee, including third party guarantee, either subordinated or not, for a maximum outstanding amount at any time that may not exceed the equivalent in Ps. of US$ 50 million.

 
- 64 -

 



NOTE 23:
(Continued)

A.  
(Continued)

 
3.
Capital increase

On May 26, 2011, APSA’s Ordinary and Extraordinary Shareholders Meeting, held on this date, decided, among other points, the following:

·  
Capital stock increase of up to Ps. 108 million through the issue of up to 1,080,000,000 new common shares of par value Ps. 0.10 each, on one or many offerings, with a share premium or not and with one voting right per share, with dividend rights in equal conditions as the rest of the outstanding shares at the issuing date, following a public offering in the country or abroad. The meeting established the parameters under which the Board of Directors will settle the share premium, with a range of prices for the share, being the minimum price Ps. 25.6133 per share of par value Ps. 1 or US$ 25.1 per ADS and a maximum price of Ps. 75 per share of par value Ps. 1 or US$ 73.4970 per ADS.

·  
Delegation on the Board of Directors of the power to define all the terms and conditions of the issuing process in one or several offerings, not expressly determined in the Shareholders Meeting with the power to sub-delegate on one or more than one director or manager, or the people that they authorize.

·  
Reduction of the term to exercise the preemptive subscription right and the accretion right to up to 10 calendar days, as provided by section 194 of Act No. 19,550 and the regulations in force, delegating on the Board of Directors the most extensive powers in order to fulfill the capital stock increase.

·  
Approval of the terms and conditions of the repurchase offering – in the context of the capital increase and subject to the effective fulfillment of this – of the outstanding convertible notes with par value US$ 31,755,502, for the amount of US$ 36.1 million, equivalent to US$ 1.13666 per convertible note.

 
- 65 -

 



NOTE 24:                      SIGNIFICANT EVENTS

A.  
IRSA Inversiones y Representaciones Sociedad Anónima

 
1.
Investment in Banco Hipotecario

Banco Hipotecario´s treasury Shares

In the course of the 2009 fiscal year and with the Total Return Swap dated January 29, 2004 having expired, Banco Hipotecario received treasury shares Clase D totaling 71.1 million.

On April 30, 2010, the Extraordinary General Shareholders’ Meeting of Banco Hipotecario resolved to delegate upon the Board of Directors the decision to pay with the treasury shares in portfolio the StAR coupons resulting from the debt restructuring as advisable based on the contractually agreed valuation methods and their actual market value after allowing the shareholders to exercise their preemptive rights on an equal footing.

On June 16, 2010, the Board of Directors of Banco Hipotecario offered to sell 36 million of its treasury Class D shares to its existing shareholders. On July 26, 2010, in the framework of the offering, the Bank sold approximately 26.9 million of its treasury Class D shares. On August 3, 2010, the Bank applied the proceeds from the offering and the remaining Class D shares to the cancellation of the StAR coupons maturing on that date.

On April 13, 2011, Banco Hipotecario´s Special Shareholders Meeting decided to authorize the Board of Directors to sell treasury shares in the open market, reducing to ten days the term established for the exercise of pre-emptive rights, which term is not applicable where the sale of shares does not exceed 1% of the Company's capital stock in any given period of 12 months.

The Company’s Banco Hipotecario treasury shares still in its portfolio amount to 36.6 million and entail an increase in the Company’s ownership interest. As considered for valuation purposes, they have risen from 29.77% to 30.51%.

 
- 66 -

 



NOTE 24:
(Continued)

A.     (Continued)

 
1.
(Continued)

Dividends Payment

Banco Hipotecario’s General Annual Shareholders Meeting, held on April 13, 2011 approved the payment of dividends for a total amount of Ps. 100 million, equivalent to 6.66667% of the capital stock or Ps. 0.068335 per outstanding share of par value Ps. 1, corresponding to the fiscal year ended on December 31, 2010. As per the Company’s holding, it is entitled to Ps. 30.5 million.

As of the date of issuance of these unaudited financial statements, the availability of this dividend is liable to BCRA’s approval in accordance with the regulation disclosed by Communication “A” 5072, its amendments and complementary regulations. The BCRA has not yet issued its approval. Additionally, on January 27, 2012, BCRA issued communications “A” 5272 and “A” 5273, by means of which it ruled the increase of some parameters of minimum capital stock to be paid-in in order to allow for dividends distribution.
 
 
 
2.
Compensation plan for executive management

The Company has developed during the period ended June 30, 2007, the design of a capitalization program for the executive personnel by means of contributions that will be made by employees and by the Company.

That plan is aimed at certain employees that the Company chooses with the intention to maintain them, increasing its total compensation through an extraordinary reward provided certain circumstances are met.

Participation and contributions to the plan are voluntary. Once the beneficiary has accepted, two types of contributions may be made.  One monthly contribution, based on the salary and one extraordinary contribution based on the annual bonus. The suggested contribution is up to 2.5% of the salary and up to 15% of the bonus. On the other hand, the Company's contribution will be 200% of monthly contributions and 300% of employees' extraordinary contributions.

Proceeds from the contributions made by participants are transferred to an independent financial vehicle, especially organized and located in Argentina as Investment Fund approved by the National Securities Commission (CNV). Such funds are freely redeemable at the participant’s request.

 
- 67 -

 



NOTE 24:
(Continued)

A.     (Continued)

 
2.
(Continued)

Proceeds from the contributions made by the Company are transferred to another financial vehicle independent of and separate from the previous one. In the future, participants will have access to 100% of the plan benefits (i.e. including the Company’s contributions made in favor of the financial vehicle created ad hoc) under the following circumstances:

•       Regular retirement under applicable labor regulations
•       Full or permanent disability or incapacity
•       Demise

In the case of resignation or dismissal without just cause, the participant will obtain the amount resulting from the Company’s contributions only if they have participated in the plan for a minimum five-year term subject to certain conditions.

During the six- month periods ended December 31, 2011 and 2010, contributions paid by the Company amount to Ps. 1,305 and Ps. 2,296.

 
3.
Compulsory expropriation order of the lot owned by Canteras Natal Crespo S.A.

On April 8, 2011, Canteras Natal Crespo S.A. (Canteras) and Caminos de las Sierras S.A. (Caminos) subscribed an agreement by means of which Canteras granted Caminos an occupation permit and the possession over a piece of land of approximately 2 ha. 8,250 square meters (portion), located on provincial road E-55 in the province of Córdoba, so that Caminos performed the works necessary for the toll road, based on the Concession agreement subscribed with the provincial Government.

With the aim of completely and adequately affecting the area to road works to be performed by Caminos, the land will be subject to the Compulsory Expropriation Regime ruled by Provincial Act No. 6,394 and its complementary rulings. The management and fulfillment of all the requirements provided by this Act will be exclusively in charge of Caminos, who shall start the proceedings within ninety (90) days as from the date of subscription of the Agreement.

 
- 68 -

 



NOTE 24:
(Continued)

A.     (Continued)

 
3.
(Continued)

The appraisal of the piece of land will be in charge of the provincial General Appraisal Council (Council) or the organization and/or entity established to replace it. Caminos has committed to the payment of compensation resulting from the appraisal performed by the Council plus 10% of the amount (compensation). As advance payment, Caminos gave the amount of Ps. 0.8 million. Once the appraisal is performed, Caminos shall pay Canteras the positive difference resulting from the compensation and the advances. The payment term shall be ninety (90) days from the Council’s resolution. Should the compensation be less than the amount advanced by Caminos, the amount already collected by Canteras will automatically be the final value for the piece of land and the existing difference shall be considered as repayment for the damages immediately and directly derived from the expropriation. As of the date these financial statements were issued, Canteras had granted Caminos the possession of the piece of land.

 
4.
Negative working capital

At the period end the Company had posted a Ps. 334,488 deficit in its working capital. The treatment to be afforded to this situation is currently being considered by the Board and the Company’s Management.

 
B.
Alto Palermo S.A.

1.     Financing and occupation agreement with NAI INTERNATIONAL II, INC.

On August 12, 1996 Empalme S.A.I.C.F.A. y G. (merged into Shopping Alto Palermo S.A. as from January 1 st, 2009, then merged into APSA), executed an agreement with NAI INTERNATIONAL II, INC. (subsequently transferred to NAI INTERNATIONAL II, INC. – Blanch Argentina) by means of which the latter granted a loan for an original principal of up to US$ 8.2 million for the construction of a multiplex cinema and part of the parking lot located in the premises of Córdoba Shopping – Villa Cabrera, which are disclosed in Fixed assets, net.

As stated in the occupation agreement related to the loan agreement, the amounts due are set off against payments generated by the occupation held by NAI INTERNATIONAL II, INC. of the building and the area known as cinema. The agreement provides that if after October, 2027, there still is an unpaid balance of the loan plus respective interest thereon, the agreement will be extended for a final term established as the shorter of the term required to fully repay the unpaid loan amount, or ten years.

 
- 69 -

 



  NOTE 24:
(Continued)

 
B.
(Continued)

 
1.
(Continued)

If the last term has elapsed and there still is an unpaid balance, APSA will be released from any and all obligation to pay the outstanding debt.

On July 1st, 2002 an amendment to the agreement was established, whose most important resolutions are as follows:

·   
The outstanding debt was de-dollarized (Ps. 1 = US$ 1).

·   
An antichresis right was created and it was established that all obligations assumed by Empalme S.A.I.C.F.A. y G. under the agreement by which the normal use and operation of the cinema center is warranted to NAI INTERNATIONAL II, INC., including those obligations involving restrictions on the use or title to property by Empalme S.A.I.C.F.A. y G. or third parties, shall be comprised in the previously mentioned real right.

Principal owed as of December 31, 2011, and unpaid interest accrued through that date, due to the original loan agreement and respective amendments are disclosed under Customers advances - Lease advances together with other advances not included in this agreement.

 
2.
Neuquén Project

The main asset of Shopping Neuquén S.A., controlled by APSA, is a plot of land of 50,000 square meters approximately, in which mixed uses center would be built. The project includes the building of a shopping center, cinemas, a hypermarket, apartments, private hospital and other compatible purposes.

On December 13, 2006, Shopping Neuquén S.A. entered into an agreement with the Municipality of Neuquén and with the Province of Neuquén by which, mainly, the terms to carry out the commercial and residential venture were rescheduled and authorized Shopping Neuquén S.A. to transfer to third parties the title to the plots of land into which the property is divided, provided that it is not that one on which the shopping center will be built.

 
- 70 -

 



  NOTE 24:
(Continued)

 
B.
(Continued)

 
2.
(Continued)

Such agreement put an end to the case “Shopping Neuquén S.A. vs. Municipalidad de Neuquén in re: procedural administrative action”, lodged at the High Court of Neuquén. Lawyers’ fees shall be borne by the company, which although they have been established are not yet final.

On July 5, 2010, Shopping Neuquen S.A. began the committed works for the first stage, which should be completed at a maximum 22 month terms starting upon beginning construction. In the case of failing to comply the conditions established in the agreement, the Municipality of Neuquén is entitled to terminate the agreement and carry out the actions that may be considered necessary for such respect, among them, to request the return of the Company´s plots acquired to the Municipality As of the date of issuance of these financial statements, an updated Schedule of Works was filed, which was not observed by the City Hall.

On April 15, 2011, Shopping Neuquén S.A. entered into an agreement with Gensar S.A,. pursuant to which Gensar S.A. has the right to acquire one of the plots of land that form part of a commercial undertaking of mixed use next to which Shopping Neuquén S.A. is building a shopping center. In this plot of 14,792.68 square meters, Gensar S.A. agreed to build and operate a hypermarket that initially will be of the Coto chain. To such effect, Gensar S.A. has taken possession of the above indicated plot of land.

On September 16, 2011 it executed a deed for the conveyance of title in favor of Gensar S.A., which deed is currently in the process of being registered with the relevant Real Estate Regulatory Entity.

 
3.
Contributed leasehold improvements - Other liabilities

In March 1996, Village Cinema S.A. inaugurated ten multiplex system cinema theatres, with an approximate surface of 4,100 square meters. This improvement of the building of Mendoza Plaza Shopping S.A. was capitalized with a balancing entry as a fixed asset, recognizing the depreciation charges and the profits over a 50-year period. The lease is for a time limit of 10 years to be renewed every four equivalent and consecutive periods, at the option of Village Cinema S.A.. At period / year-end, the amount pending of accrual is disclosed under Other liabilities – contributed leasehold improvements.

 
- 71 -

 



  NOTE 24:
(Continued)

B.  
(Continued)

 
4.
Acquisition of Cresud S.A.C.I.F. y A.´s Notes

On March 10, 2011, Emprendimiento Recoleta S.A. (controlled by APSA) acquired Cresud S.A.C.I.F. y A. Notes for a total amount of US$ 2.5 million due on March 10, 2013. Principal is amortized in four quarterly installments payable as from June 11, 2012 and accruing interest at a fixed rate of 7.5% per annum, payable in eight quarterly installments as from June 8, 2011.

 
5.
Arcos del Gourmet S.A.

 
(i)
Amendment Agreement of Arcos del Gourmet S.A.

On September 6, 2011, Arcos del Gourmet S.A. subscribed a restructuring agreement of the concession with ADIF (transferred to the rail wealth under ONABE’s jurisdiction), by means of which it was decided to expand the concession term until December 31, 2030, automatically extendable for 3 years and 4 months as from that date, provided the fulfillment of all the commitments assumed. This new contract allows for another extension for 3 additional years in case the Company declares so. Likewise, a maximum term of 24 months was set (as from the date of subscription of the agreement) to perform the works and opening of the Shopping Center. This agreement set a new monthly fee of Ps. 0.2 million (plus VAT) until December 31, 2025 and Ps. 0.25 million (plus VAT) as from January 1st, 2026. Notwithstanding this, subsequently and until the concession term is ended, fees will be determined every 2 years.

Additionally, to secure fulfillment of the agreement, Arcos del Gourmet S.A. committed itself to hire a surety bond for Ps. 4,460, to make a deposit in cash of Ps. 400 and to hire another surety bond in favor of ADIF as collateral to the execution of the works agreed in due time and proper form for Ps. 14,950. Likewise, Arcos de Gourmet S.A. took other obligations related to works to be performed.

This agreement would replace the one subscribed in ONABE.

 
- 72 -

 



  NOTE 24:
(Continued)

 
B.
(Continued)

 
5.
(Continued)

 
(ii)
Capital increase

A Shareholders Meeting of Arcos del Gourmet S.A. was held on October 5, 2011, which finally approved Arcos´s financial statements for the fiscal year ended June 30, 2011. Such Meeting was adjourned and on November 4, 2011 approved a capital increase of up to Ps. 11,000 with a subscription price of Ps. 0.002594 per shares, which includes Ps. 0.001 par value per share and Ps. 0.001594 as share premium per share. The Shareholder Meeting also approved payment of subscription price by the capitalization of existing irrevocable contributions, the debt-for-equity swap involving some loan agreements granted by APSA plus accrued interest, with the balance being paid-in in cash. As of the date these financial statements are issued, the registration of these increases before the Public Trade Registry is pending.

 
6.
Reimbursement of current and expired cash dividends.

On December 20, 2011, APSA received from Caja de Valores S.A. the amount of Ps. 5,838 for funds sent by the former to pay undistributed cash dividends, both for current dividends and for expired dividends, as per the following detail:

- Ps. 2,711 to expired dividends;
- Ps. 3,128 to current dividends.

Additionally, on December 30, 2011, the Company received from Caja de Valores S.A. the amount of Ps. 1,098 corresponding to expired dividends.

The amounts corresponding to current dividends are disclosed under the “Dividends payable” line item, while the funds corresponding to expired dividends were booked against “Retained Earnings”.



 
- 73 -

 



NOTE 25:   DERIVATIVES CONTRACTS

a)  
Futures - APSA

During the period APSA entered into transactions with derivative instruments which resulted in an unrealized loss of Ps. 1,074 and is accounted for under "Other financing expense" in the Statement of Income.

The table below lists financial derivative transactions conducted during the period on the corresponding gains/losses thereon:

Futures
Bank
 
Amount
US$
 
Due date
 
Gain (Loss)
 
Unsettled transactions
               
Purchase of dollars
Standard Bank Argentina S.A.
    5,000  
01/31/12
    (502 )
Purchase of dollars
Standard Bank Argentina S.A.
    6,000  
03/30/12
    (373 )
Subtotal
                (875 )
Settled transactions
                 
Purchase of dollars
Banco Santander Río S.A.
    6,000  
11/30/11
    79  
Purchase of dollars
Standard Bank Argentina S.A.
    5,000  
12/31/11
    (278 )
Subtotal
                (199 )
Gain on transactions with derivative financial instruments
              (1,074 )

As of December 31, 2011, the balance of derivative financial instruments transactions amounts to Ps. 875, disclosed under “Other Payables” line item.

b)  
Futures contracts – Hoteles Argentinos S.A. (HASA)

In order to reduce financing costs related to loans granted by Standard Bank Argentina S.A., HASA entered into non-deliverable forwards (“NDF”) for the purchase of US Dollars. During the six-month period ended December 31, 2011, the Company has recognized a loss on such transactions that amounts to Ps.150 included under “Other financial expenses” of the Statement of Income.

 
- 74 -

 



NOTE 26:         SUBSEQUENT EVENTS

Emprendimiento Recoleta S.A. (ERSA) Shareholders’ meeting

On January 9, 2012, ERSA (APSA’s subsidiary) Annual General and Special Shareholders’ Meeting was held. In the meeting the following main points were approved:

- Approval of the financial statements as of and for the fiscal year ended on June 30, 2011;
 
- Transfer to legal reserve of 5% of the net income for the fiscal year ended on June 30, 2011, i.e. the amount of Ps. 498.
 
- To pay a cash dividend of Ps. 5,000 and to allocate the balance to the account “Reserve for new projects”.
 

 
- 75 -

 












IRSA Inversiones y Representaciones
Sociedad Anónima








Free translation of the Unaudited Financial Statements
For the six-month periods
 beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010




 
- 76 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Balance Sheets as of December 31 and June 30, 2011
In thousands of pesos (Note 1)
 
Free translation from the original prepared in Spanish for publication in Argentina
 

   
December 31,
2011
   
June 30,
2011
     
December 31,
2011
   
June 30,
2011
 
                           
ASSETS
           
LIABILITIES
           
CURRENT ASSETS
           
CURRENT LIABILITIES
           
Cash and banks (Note 2)
    18,918       27,276  
Trade accounts payable (Note 6)
    18,776       18,734  
Investments (Exhibits C and D)
    42,168       42,188  
Customer advances (Note 7)
    7,550       4,971  
Accounts receivable, net (Note 3)
    39,582       48,536  
Short-term debt (Note 8)
    589,264       525,926  
Other receivables (Note 4)
    36,064       72,908  
Salaries and social security payable
    2,536       3,086  
Inventories (Note 5)
    26,698       11,979  
Taxes payable (Note 9)
    8,294       10,081  
Total Current Assets
    163,430       202,887  
Other liabilities (Note 10)
    54,014       23,856  
                 
Subtotal Current Liabilities
    680,434       586,654  
                 
Provisions (Exhibit E)
    5,511       1,082  
                 
Total Current Liabilities
    685,945       587,736  
NON-CURRENT ASSETS
                                 
Accounts receivable, net (Note 3)
    330       1,885                    
Other receivables (Note 4)
    69,714       58,738  
NON-CURRENT LIABILITIES
               
Inventories (Note 5)
    63,253       61,685  
Long-term debt (Note 8)
    1,298,310       1,238,120  
Investments (Exhibits C and D)
    3,295,729       3,183,238  
Taxes payable (Note 9)
    12,030       41,809  
Fixed assets, net (Exhibit A)
    926,338       939,252  
Other liabilities (Note 10)
    56,150       60,112  
Intangible assets, net (Exhibit B)
    41       41  
Total Non-Current Liabilities
    1,366,490       1,340,041  
Subtotal Non-Current Assets
    4,355,405       4,244,839  
Total Liabilities
    2,052,435       1,927,777  
Negative goodwill, net
    (37,095 )     (38,134 )                  
Total Non-Current Assets
    4,318,310       4,206,705  
SHAREHOLDERS´ EQUITY (according to the corresponding statement)
    2,429,305       2,481,815  
Total Assets
    4,481,740       4,409,592  
Total Liabilities and Shareholders´ Equity
    4,481,740       4,409,592  

 
The accompanying notes and exhibits are an integral part of these unaudited financial statements.


         
Alejandro G Elsztain
Vice president II
Acting as President
 
- 77 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Statements of Income
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

In thousands of pesos (Note 1)
Free translation from the original prepared in Spanish for publication in Argentina

   
December 31, 2011
   
December 31, 2010
 
Revenues
    130,649       114,411  
Costs (Exhibit F)
    (36,524 )     (41,978 )
Gross profit
    94,125       72,433  
Administrative expenses (Exhibit H)
    (34,868 )     (40,358 )
Selling expenses (Exhibit H)
    (7,520 )     (7,125 )
Subtotal
    (42,388 )     (47,483 )
Gain from recognition of inventories at net realizable value
    25,031       12,192  
Operating income
    76,768       37,142  
Amortization of negative goodwill, net
    1,039       1,039  
Financial results generated by assets:
               
Interest income
    10,848       18,303  
Foreign exchange gain
    13,641       7,141  
Other holding (loss) gain
    (7,626 )     6,630  
Subtotal
    16,863       32,074  
Financial results generated by liabilities:
               
Interest expense (Exhibit H)
    (107,136 )     (74,269 )
Foreign exchange loss
    (67,358 )     (16,993 )
Other financial expenses (Exhibit H)
    (3,247 )     (1,951 )
Subtotal
    (177,741 )     (93,213 )
Financial results, net
    (160,878 )     (61,139 )
Gain on equity investees (Note 12 c.)
    187,741       190,068  
Other expenses, net (Note 11)
    (7,015 )     (6,654 )
Net income before tax
    97,655       160,456  
Income tax (Note 15)
    35,397       10,102  
Net income for the period
    133,052       170,558  
Earnings per share (Note 13):
               
Basic net income per share
    0.230       0.295  
Diluted net income per share
    0.230       0.295  

The accompanying notes and exhibits are an integral part of these unaudited financial statements.


         
Alejandro G Elsztain
Vice president II
Acting as President

 
- 78 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Statements of Changes in Shareholders’ Equity
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010
In thousands of pesos (Note 1)
Free translation from the original prepared in Spanish for publication in Argentina
 
   
Shareholders’ contributions
   
Reserved earnings
                         
Caption
 
Common stock
(Note 14.a)
   
Inflation adjustment of common stock
   
Additional paid-in capital
   
Total
   
Legal Reserve
(Note 14.b)
   
Reserve for new developments
   
Long-term incentive program reserve (Note 23)
   
Cumulative translation adjustment
   
Retained earnings
   
Total at the period end
 
Balances as of June 30, 2010
    578,676       274,387       793,123       1,646,186       40,306       193,486       -       17,459       505,609       2,403,046  
Cumulative translation adjustment
    -       -       -       -       -       -       -       4,448       -       4,448  
Approppiation of retained earnings approved by
Shareholders meeting held 10.29.10
                                                                               
- Distribution of dividends
    -       -       -       -       -       -       -               (120,000 )     (120,000 )
- Legal Reserve increase
    -       -       -       -       16,725       -       -       -       (16,725 )     -  
- Reserve for new developments increase
    -       -       -       -       -       197,776       -       -       (197,776 )     -  
Net gain for the period 07.01.10 – 12.31.10
    -       -       -       -       -       -       -       -       170,558       170,558  
Balances as of December 31, 2010
    578,676       274,387       793,123       1,646,186       57,031       391,262       -       21,907       341,666       2,458,052  
Approppiation of retained earnings approved by
                                                                               
Shareholders meeting held 05.26.11
                                                                               
- Distribution of dividends
    -       -       -       -       -       -       -       -       (100,000 )     (100,000 )
Cumulative translation adjustment
    -       -       -       -       -       -       -       12,217       -       12,217  
Net gain for the period 01.01.11 – 06.30.11
    -       -       -       -       -       -       -       -       111,546       111,546  
Balances as of June 30, 2011
    578,676       274,387       793,123       1,646,186       57,031       391,262       -       34,124       353,212       2,481,815  
Approppiation of retained earnings approved by
                                                                               
Shareholders meeting held 10.31.11
                                                                               
- Distribution of dividends
    -       -       -       -       -       -       -       -       (211,575 )     (211,575 )
- Legal Reserve increase.
    -       -       -       -       14,105       -       -       -       (14,105 )     -  
- Reserve for new developments increase
    -       -       -       -       -       56,421       -       -       (56,421 )     -  
Long-term incentive program reserve
    -       -       -       -       -       -       2,312       -       -       2,312  
Reimbursement of expired dividends. (see Note 1.5.r)
    -       -       -       -       -       -       -       -       3,640       3,640  
Cumulative translation adjustment
    -       -       -       -       -       -       -       20,061       -       20,061  
Net gain for the period 07.01.11 – 12.31.11
    -       -       -       -       -       -       -       -       133,052       133,052  
Balances as of December 31, 2011
    578,676       274,387       793,123       1,646,186       71,136       447,683       2,312       54,185       207,803       2,429,305  
 
The accompanying notes and exhibits are an integral part of these unaudited financial statements.
 
         
Alejandro G Elsztain
Vice president II
Acting as President
 
- 79 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Statements of Cash Flows
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

In thousands of pesos (Note 1)
Free translation from the original prepared in Spanish for publication in Argentina


   
December 31, 2011
   
December 31, 2010
 
CHANGES IN CASH AND CASH EQUIVALENTS
           
Cash and cash equivalents as of the beginning of the year
    45,162       57,467  
Cash and cash equivalents as of the end of the period
    28,758       119,296  
Net (decrease) increase in cash and cash equivalents
    (16,404 )     61,829  
CAUSES OF CHANGES IN CASH AND CASH EQUIVALENTS
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
· Net income for the period
    133,052       170,558  
- Adjustments to reconcile net income to cash flows from operating activities:
               
· Income tax accrued for the period
    (35,397 )     (10,102 )
· Allowances and provisions
    17,915       17,793  
· Amortization and depreciation
    11,555       12,238  
· Gain on equity investees
    (187,741 )     (190,068 )
· Financial results, net
    50,357       (10,823 )
· Accrued interest
    105,279       63,047  
· Long-term incentive program reserve (Note 23)
    517       -  
· Gain from recognition of inventories at net realizable value
    (25,031 )     (12,192 )
· Amortization of negative goodwill, net
    (1,039 )     (1,039 )
- Changes in certain assets and liabilities net of non-cash transactions:
               
· Decrease in accounts receivable net
    15,476       6,689  
· Increase in other receivables
    (1,438 )     (7,389 )
· Decrease in inventories
    19,213       24,626  
· Decrease in trade accounts payable
    (3,758 )     (3,215 )
· Increase (Decrease) in customer advances
    4,800       (11,324 )
· Decrease in taxes payable, salaries and social security payable
    (3,644 )     (2,995 )
· Decrease in other liabilities
    (7,817 )     (12,179 )
Net cash provided by operating activities
    92,299       33,625  
CASH FLOWS FROM INVESTING ACTIVITIES:
               
· Increase in current investments
    (21,937 )     (15,704 )
· Decrease in other investments
    13,473       164,283  
· Acquisition and improvements of fixed assets
    (8,320 )     (573 )
· Decrease (Increase) in loans granted to related parties
    35,637       (59,638 )
· Share-holding increase in equity investees
    (28 )     (480,317 )
· Irrevocable contributions in subsidiary companies
    (1,723 )     (241,182 )
· Dividends collected
    111,580       114,784  
Net cash provided by (used in) investing activities:
    128,682       (518,347 )
CASH FLOWS FROM FINANCING ACTIVITIES:
               
· Dividends paid
    (211,575 )     (120,000 )
· Proceeds from issuance of Non convertible notes 2020 net of expenses
    -       567,449  
· Increase in bank overdraft, net
    29,073       116,370  
· Increase in loans received from related parties
    18,190       54,925  
·   Increase (payment) of loans
    30,000       (40,000 )
· Interest paid
    (103,073 )     (32,193 )
Net cash (used in) provided by financing activities:
    (237,385 )     546,551  
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENT
    (16,404 )     61,829  

The accompanying notes and exhibits are an integral part of these unaudited financial statements.

         
Alejandro G Elsztain
Vice president II
Acting as President
 
- 80 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Statements of Cash Flows (continued)
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

In thousands of pesos (Note 1)

Free translation from the original prepared in Spanish for publication in Argentina

   
December 31, 2011
   
December 31, 2010
 
Supplemental cash flow information
           
· Income tax paid
    -       5,598  
                 
Non-cash activities:
               
· Increase in non-current investments through a decrease in other receivables
    -       56,593  
· Decrease in non-current investment through an increase in other receivables
    819       -  
· Increase in other receivables through an increase in taxes payable
    3,032       -  
· Cumulative translation adjustment of investments
    20,061       4,448  
· Transfer of fixed assets to inventories
    10,469       -  
· Transfer of undeveloped parcels of land to inventories
    -       3,030  
· Increase in inventories through a decrease in equity investments
    -       14,541  
· Long term incentive program reserve
    1,795       -  
· Reimbursement of dividends barred by the statute of limitations
    3,640       -  
                 
Composition of cash and cash equivalents at the period end
               
Cash and banks
    18,918       11,030  
Current investments
    42,168       145,033  
Subtotal cash and banks and current investments
    61,086       156,063  
Less: (items not considered cash and cash equivalents)
               
· Boden 2012
    1       2  
· Boden 2013
    12       14  
· Mutual funds
    2,349       2,097  
· Stock shares
    17,107       20,595  
· Non-convertible Notes APSA 2012 – Accrued interest
    39       116  
· Non-convertible Notes APSA 2012
    6,645       8,238  
· Convertible Notes APSA 2014 – Accrued interest
    6,175       5,705  
Cash and cash equivalents
    28,758       119,296  


         
Alejandro G Elsztain
Vice president II
Acting as President

 
- 81 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Notes to the Unaudited Financial Statements
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010

 
In thousands of pesos
 
Free translation from the original prepared in Spanish for publication in Argentina


NOTE 1:
ACCOUNTING STANDARDS

Below are the most relevant accounting standards used by the Company to prepare these  unaudited financial statements:

1.1.         Preparation and presentation of financial statements

These unaudited financial statements are stated in thousands of Argentine pesos and were prepared in accordance with disclosure and valuation criteria contained in the Technical Resolutions issued by the Federación Argentina de Consejos Profesionales de Ciencias Económicas, approved with certain amendments by the Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires, in accordance with the resolutions issued by the National Securities Commission.

The Company’s results for the six-month periods ended December 31, 2011 have not been audited. The Company’s management estimates that they include all the adjustments necessary to present fairly the results for such period.

The Company’s results for the six-month periods ended December 31, 2011 do not necessarily reflect the proportion of the Company’s full-year results.

 
1.2.
Use of estimates

The preparation for financial statements requires the Company’s Management, at a specific date, to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for the period. The Company’s Management makes estimations to calculate, for example, the allowance for doubtful accounts, depreciation and amortization, the impairment of long-lived assets, income taxes, contingencies allowances, fair value of assets acquired in a business combination, the fulfillment of certain conditions for valuation of inventories to its net realizable value and fair value of transaction of exchanges (barters). Future actual results could differ from the estimates and assumptions made at the date of these financial statements.


 
- 82 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:
(Continued)

1.3.         Recognition of the effects of inflation

The financial statements have been prepared in constant Argentine Pesos, reflecting the overall effects of inflation through August 31, 1995. From that date and until December 31, 2001 the Company discontinued the restatement of the financial statements due to a period of monetary stability. From January 1, 2002 up to February 28, 2003 the effects of inflation were recognized due to the existence of an inflationary period. As from that date, the restatement of the financial statements was discontinued.

This criterion is not in line with current professional accounting standards, which establish that the financial statements should have been restated through September 30, 2003. However, due to the low level of inflation rates during the period from March to September 2003, this deviation has not had a material effect on the financial statements taken as a whole.

The rate used for restatement of items in these financial statements is the domestic wholesale price index published by the National Institute of Statistics and Census.

1.4.  
Comparative information

Balances items as of June 30, 2011 shown in these unaudited financial statements for comparative purposes arise from audited annual financial statements for the year then ended.

Balances of the six - month period ended December 31, 2011 of the unaudited income, shareholders’ equity and cash flow statements are shown for comparative purpose with the same period of the previous fiscal year.

The unaudited financial statements as of December 31, 2010 originally issued have been subject to certain reclassifications required in order to present these figures comparatively with those stated as of December 31, 2011.


 
- 83 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.         Significant accounting polices

a.     Cash and banks

Cash on hand has been valued at face value.

 
b.
Foreign currency assets and liabilities

Foreign currency assets and liabilities were valued at each period/year end exchange rates.

Operations denominated in foreign currency are converted into pesos at the exchange rates in effect at the date of settlement of the operation.
          
              c.     Current investments

Current investments in equity and debt securities and mutual funds were valued at their net realizable value.
 
              d.     Accounts receivable, net and trade accounts payable.

Accounts receivable, net and trade accounts payable have been valued at nominal value. Values obtained by this do not differ significantly from those that had been valued at the estimated price applicable to spot operations at the time of the transaction plus interest and implicit financial components accrued at the internal rate of return determined at that moment.
 
              e.     Financial receivables and payables

Financial receivables and payables have been valued at nominal value plus accrued interest at the end of the period/year. Values obtained by this do not differ significantly from those that had been valued at the amount deposited and collected, respectively, net of the cost of the transaction, plus financial results accrued based on the internal rate of return estimated at the time of initial recognition.

 
- 84 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.  
(Continued)

f.     Other receivables and liabilities

Other receivables and other liabilities have been valued at face value plus the financial results accrued at the closing of the corresponding period/year. The figures thus obtained are not significantly different from those that would have been obtained if valued on the basis of the best possible estimate of the amounts receivable and payable, respectively, discounted by application of a rate that reflects the time value of money and the specific risks inherent in the transaction as estimated at the time of recognizing the item in assets and liabilities, respectively.

Certain receivables and liabilities disclosed under other non-current receivables and liabilities, were valued based on the best estimate of the amount receivable and payable, respectively, discounted at an interest rate that reflect the value-time of money and the estimate specific transaction risks at the time of incorporation to assets and liabilities, respectively.

As established by the regulations of the accounting professional standards, deferred tax assets and liabilities and minimum presumed income tax (MPIT) have not been discounted.

Financial Derivatives Instruments

The Company uses certain financial instruments as a supplement to reduce financing costs. The Company is not engaged in trading or any other speculative use of financial instruments.

Liabilities originated in these transactions pertain to foreign currency futures contracts and they have been measured at their estimated settlement cost (See Note 22).

The differences generated during the period as a consequence of applying the measurement criteria described above have been recorded under “financial results, net”.

 
g.
Balances corresponding to financial transactions and sundry receivables and payables with related parties

Receivables and payables with related parties generated by financial transactions and other sundry transactions were valued in accordance with the terms agreed by the parties.

 
- 85 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.  
(Continued)

h.  
Inventories

A property is classified as inventories upon determination by the Board of Directors that the property is to be marketed for sale in the normal course of business over the next several years.

Properties classified as inventories have been valued at acquisition or construction cost restated as mentioned in Note 1.3., or estimated market value, whichever is lower. Costs include land and land improvements, direct construction costs, construction overhead costs, financial costs and real estate taxes.

Inventories on which advance payments that establish price have been received, and the operation’s contract terms and conditions assure that the sale will be effectively accomplished and that the income will be realized, are valued at its net realizable value. Profits arising from such valuation are shown in the “Gain from recognition of inventories at net realizable value” caption of the Statements of Income.

Properties held for sale are classified as current or non-current based on the estimated date of sale and the time at which the related receivable is expected to be collected by the Company.

The amount recorded in inventories, net of allowances set up, does not exceed their estimated recoverable value at the end of the period/year.

·  
Units to be received

The Company has rights to receive certain property units to be built, which have been valued according to the accounting measuring standards corresponding to inventories receivables (the price established in the deed or net realizable value, as applicable) and there have been disclosed under “Inventories”.

i.  
Non-current investments

·  
Investments in debt securities:
Investments in debt securities were valued at their net realizable value.

 
- 86 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.  
(Continued)

 
i.
(Continued)

·  
Investments in subsidiaries and equity investments:
Non current investments in subsidiaries and equity investments have been valued by using the equity method of accounting based on the financial statements issued by them. The accounting standards used by the subsidiaries and related companies to prepare their financial statements are similar to the ones used by the Company.

This item includes the lower or higher value paid for the purchase of shares in subsidiaries and affiliated companies assignable to the assets acquired, and goodwill related to the subsidiaries and affiliated companies acquired.

·  
Banco Hipotecario S.A. and Banco de Crédito & Securitización S.A.:
The financial statements of Banco Hipotecario S.A. and Banco de Crédito & Securitización S.A. are prepared in accordance with the Central Bank of the Argentine Republic (“BCRA”) standards. For the purpose of the valuation of the investment in the Company, adjustments necessary to adequate the financial statements to the professional accounting standards have been considered.

In accordance with the regulations of the BCRA, there are certain restrictions on the distribution of profits by Banco Hipotecario S.A. to the Company.

·  
Tyrus S.A.:
Foreign permanent investments held by the Company through Tyrus S.A. in Uruguay have been classified as “integrated” or “not-integrated” into the Company’s operations, considering the characteristics of the aforementioned investments abroad and their operations.

·  
Undeveloped parcels of lands:
The Company acquires undeveloped land in order to provide an adequate and well-located supply for its residential and office building operations. The Company's strategy for land acquisition and development is dictated by specific market conditions where the Company conducts its operations.

Land held for development and sale and improvements are stated at cost restated as mentioned in Note 1.3. or market value, whichever is lower.

 
- 87 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

 
1.5.
(Continued)

 
i.
(Continued)

Land and land improvements are transferred to inventories or fixed assets when their trade is decided or commences its construction.

The values of non-current investments thus obtained, do not exceed their respective estimated recoverable values at the end of the period/year.

 
j.
Fixed assets, net

Fixed assets comprise primarily of rental properties and other properties and equipment held for use by the Company.

Fixed assets value, net of allowances set up, does not exceed estimated recoverable value at the end of the period/year.

·  
Rental properties:
Rental properties are carried at acquisition and/or construction cost, restated as mentioned in Note 1.3., less accumulated depreciation and allowance for impairment at the end of the period/ year. The Company capitalizes the financial accrued costs associated with long-term construction projects.

Depreciation was computed under the straight-line method over the estimated useful lives of each asset applying annual rates in order to extinguish their values at the end of its useful life. The Company revises the useful life of the assets periodically.

The Company has allowances for impairment of certain rental properties as disclosed in Exhibit A. Increases and decreases of such allowances are disclosed in Exhibit E.

Significant renewals and improvements, which improve or extend the useful life of the asset are capitalized and depreciated over its estimated remaining useful life. At the time depreciable assets are retired or otherwise disposed of, the cost and the accumulated depreciation of the assets are eliminated from the accounts and the resulting gain or loss is disclosed in the Statements of Income.

 
- 88 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.  
(Continued)

 
j.
(Continued)

·  
Other properties and equipment:
Other properties and equipment properties are carried at cost, restated as mentioned in Note 1.3., less accumulated depreciation at the end of the period/year. Accumulated depreciation is computed under the straight-line method over the estimated useful lives of the assets, as specified below:

Assets
 
Estimated useful life (years)
 
Leasehold improvements
 
On contract basis
 
Furniture and fixtures
    10  
Vehicles
    5  
Machinery and equipment
    10  
Computer equipment
    3  

The cost of maintenance and repairs is charged to expense as incurred.

The cost of significant renewals and improvements are added to the carrying amount of the respective assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts.

k.  
Intangible assets, net

The Company segregates in this caption, among others, the expenses that the Company avoids incurring as a result of acquiring effective rent contracts and the estimated costs of entering into rent contracts acquired (see Note 1.5.I.). These are shown net of their accumulated amortization, calculated on the basis of the average initial remaining life of the rent contracts acquired.

“Project development expenses” include expenses initially incurred to launch the marketing of the plots of the project “Abril”, which are depreciated on the basis of plots sold.

The value of these assets does not exceed their estimated recoverable value as of period/ year end.

 
- 89 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.  
(Continued)

l.  
Business combinations

Significant entities or net asset acquired by the Company are recorded in line with the “purchased method” set forth in Technical Resolution No. 18 and Technical Resolution No. 21. All assets and liabilities acquired to third independent parties are adjusted to show their fair value. The Company identifies the assets and liabilities acquired, that included intangible assets such as: lease agreements acquired for prices and terms that are either higher or lower than in the market; costs of executing and delivering the lease agreements in force (costs that the Company avoids incurring as a result of acquiring effective lease agreements); the value of acquired brands, the value of any deposits associated to the investment and the intangible value inherent to customer relations

The process of identification and the determination of the purchase price paid is a matter that requires complex judgments and significant estimates.

The Company uses the information contained in valuations estimated by independent appraisers as primary base for assigning the price paid for the land, buildings and shopping centers. The amounts assigned to all the other assets and liabilities are based on independent valuations or on the Company´s own analysis on comparable assets and liabilities.

If the price paid is larger than the value of the tangible and intangible assets and liabilities as identified, the excess is considered to be goodwill.

m.  
Debt issuance costs

Expenses incurred in connection with the issuance of debt are amortized over the life of the related issuances. In the case of redemption or conversion of these notes, the related expenses are amortized using the accelerated depreciation method.

Amortization has been recorded under “Financial results and holding gain/loss, net” in the Statements of Income as a greater financing expense.

n.  
Customer advances

Customer advances represent payments received in connection with the sale and rent of properties and has been valued according to the amount of money received.

 
- 90 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.  
(Continued)

o.     Income tax

The Company has recognized the charge for income tax by the deferred tax liability method, recognizing timing differences between measurements of accounting and tax assets and liabilities (see Note 15).

To determine deferred assets and liabilities, the tax rate expected to be in effect at the time of reversal or use has been applied to timing differences identified and tax loss carryforwards, considering the legal regulations approved at the date of issuance of these financial statements.

 
p.
MPIT

The Company calculates MPIT by applying the current 1% rate on computable assets at the end of the period/ year. This tax complements income tax. The Company’s tax obligation in each period will coincide with the higher of the two taxes. However, if MPIT exceeds income tax in a given period, that amount in excess will be computable as payment on account of income tax arising in any of the following ten years.

The Company has recognized MPIT accrued in the period and paid in previous years as credit, because the Company estimates that in the future years it may be computable as prepayment of income tax.

 
q.
Allowances and Provisions

Changes in provisions are showed in Exhibit E.

·  
Allowance for doubtful accounts:
The allowance for losses is recognized when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the terms of the agreements. The allowance is calculated based on an individual analysis of the recoverability of the accounts receivable.

 
- 91 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.         (Continued)

 
q.
(Continued)

The estimate of the amount and the possibility of fulfillment are made considering the opinion of the legal counsels. When it comes to its mortgage-secured receivables, the Company applies the collateral’s realization value upon analyzing the recoverability of receivables with hints of uncollectibility.

While Management uses the information available to make assessments, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the assessments. Management has considered all events and/or transactions that are subject to reasonable and normal methods of estimations, and the financial statements reflect that consideration.

·  
For impairment of assets:
The Company regularly asses its non-current assets for recoverability at the end of every year.

The Company estimates the recoverable value of rental properties based on their economic use value, which is determined based on estimated future cash flows discounted. For the rest of the assets (inventories and undeveloped parcels of land) the Company makes a comparison with market values based on values of comparable properties. If the recoverable value of assets, which had been impaired in prior years, increases, the Company records the corresponding reversals of impairment loss as required by accounting standards.

·  
For lawsuits:
The Company has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor issues. The Company accrues liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes of these matters and the Company’s lawyers’ experience in contesting, litigating and settling other matters.

As the scope of the liabilities becomes better defined, there may be changes in the estimates of future costs, which could have an effect on the Company's future results of operations and financial condition or liquidity.

 
- 92 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.         (Continued)

 
q.
(Continued)

At the date of issuance of these financial statements, Company’s Management understands that there are no elements to foresee other potential contingencies having a negative impact on these financial statements

 
r.
Shareholders’ equity accounts

Amounts of shareholders’ equity accounts have been restated following the guidelines detailed in Note 1.3. until February 28, 2003. Subsequent movements are stated in the currency of the month to which they correspond.

“Common stock” account was stated at historical nominal value. The difference between value stated in constant currency, following the guidelines detailed in Note 1.3., and historical nominal value is shown under “Inflation adjustment of common stock”.

"Cumulative translation adjustments" corresponds to exchange rate differences generated by investments in foreign companies classified as non-integrated to the Company’s transactions.

“Long-term incentive program reserve”, corresponds to contributions accrued by the Company and its subsidiaries (at the participation rate), following the Long-term Incentive Program mentioned on Note 23. The reimbursement of APSA’s dividends expired has been recorded against Retained Earnings proportionally to the Company’s interest (See Note 24 B.6 to the unaudited consolidated financial statements).

 
s.
Profit and loss accounts

The profit and loss for the year are shown as follows:

Amounts included in Statements of Income are shown in currency of the month to which they correspond.

Charges for assets consumed (fixed asset depreciation, intangible asset amortization and cost of sales) were determined based on the values recorded for such assets.

 
- 93 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.         (Continued)

 
s.
(Continued)

Results from investments in subsidiary and equity investments were calculated under the equity method, by applying the percentage of the Company’s equity interest to the results of such companies, with the adjustments for application of Technical Resolution No. 21.

 
t.
Revenue recognition

t.1.        Sales of properties

The Company records revenue from the sale of properties when all of the following criteria are met:

·  
The sale has been consummated.
·  
There is sufficient evidence to demonstrate the buyer’s ability and      commitment to pay for the property.
·  
The Company’s receivable is not subject to future subordination.
·  
The Company has transferred the property to the buyer.

The Company uses the percentage-of-completion method of accounting with respect to sales of development properties under construction. Under this method, revenue is recognized based on the ratio of costs incurred to total estimated costs according to budgeted costs. The Company does not recognize results until construction activities have begun. The percentage-of-completion method of accounting requires the Company’s Management to prepare budgeted costs in connection with sales of properties/units. All changes to estimated costs of completion are incorporated into revised estimates during the contract period.

 
t.2.
Revenues from leases

Revenues from leases are recognized considering its terms and conditions and over the life of the related lease contracts.

 
- 94 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.         (Continued)

 
u.
Cash and cash equivalents

The Company considers, for cash flow purposes, all highly liquid investments with original maturities of three months or less, consisting primarily of mutual funds, as cash equivalents.
 
            v.     Negative Goodwill, net

Goodwill has been restated following the guidelines mentioned in Note 1.3. and amortization has been calculated by the straight-line method based on an estimated useful life, considering the weighted-average of the remaining useful life of identifiable assets acquired subject to depreciation.

 
w.
Dividends

IRSA’s Board of Directors decided that its dividend policy shall consist in the distribution, pro rata amongst the Shareholders, of an amount equivalent to the highest of a) up to twenty per cent (20%) of revenues posted by the “Offices and others” segment that comes from the Net Operating Income by Business Segment as of June 30 of each year (Note 3 to the consolidated financial statements) or b) up to twenty per cent (20%) of net income as of June 30 of each year. This policy requires that the Company must at all times abide by the covenants imposed on it by virtue of its financial commitments.

 
x.
Financial Derivatives Instruments

The Company uses certain financial instruments as a supplement to reduce financing costs. The Company is not engaged in trading or any other speculative use of financial instruments.

A breakdown of the Company’s transactions with financial derivatives is included in Note 22.

 
- 95 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 1:                 (Continued)

1.5.         (Continued)

 
x.
(Continued)

The resulting assets and/or liabilities have been valued at their net realizable value and/or estimated settlement cost at the end of the fiscal year.

Any difference arising during the period/ year due to the application of measurement criteria has been recognized under "Financial results generated on assets/liabilities -  Other holding gains/losses", as applicable.

1.6.         Adoption of the International Financial Reporting Standards

The National Securities Commission through the Resolution No. 562 has mandated that the Technical Resolution No. 26 of the Federación Argentina de Consejos Profesionales de Ciencias Económicas (FACPCE) is to be applied by the companies admitted to the Public Offering System under Law No. 17,811 in connection with either their capital and/or negotiable obligations, and/or by the companies that have applied for admission to the Public Offering System. FACPCE’s Technical Resolution No. 26 adopts the International Financial Reporting Standards issued by the International Accounting Standards Board. The Company shall apply IFRS as from the fiscal year beginning on July 1, 2012.  On April 29, 2010, IRSA´s Board of Directors has approved the specific implementation plan for the application of IFRS, which is currently underway.



NOTE 2:                 CASH AND BANKS

The breakdown for this item is as follows:

   
December 31,
2011
   
June 30,
2011
 
Cash on hand (Exhibit G)
    114       149  
Banks accounts (Exhibit G)
    18,804       27,127  
      18,918       27,276  

 
- 96 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 3:                 ACCOUNTS RECEIVABLE, NET

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Trade receivables, leases receivable and services (1) (Exhibit G)
    28,472       330       27,569       1,885  
Related parties (Note 12.a.) (Exhibit G)
    10,998       -       15,285       -  
Debtors under legal proceedings and past due debts
    8,162       -       8,596       -  
Checks to be deposited
    1,788       -       6,908       -  
Less:
                               
Allowance for doubtful accounts (Exhibit E)
    (9,838 )     -       (9,822 )     -  
      39,582       330       48,536       1,885  
(1)
Current and non-current receivables from the sale of real estate are secured by first degree mortgages in favor of the Company.


NOTE 4:                 OTHER RECEIVABLES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Related parties (Note 12.a.) (Exhibit G)
    25,841       2,855       58,914       2,851  
Prepaid expenses
    4,134       1,384       5,417       992  
MPIT
    214       64,866       2,363       54,278  
Present value
    -       (146 )     -       (146 )
Maintenance fees to be reimbursed
    1,393       -       -       -  
Others (Exhibit G)
    4,482       755       6,214       763  
      36,064       69,714       72,908       58,738  


 
- 97 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 5:                 INVENTORIES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Museo Renault (4)
    21,148       -       -       -  
Units to be received Caballito (1) (Note 12.a.)
    -       52,205       -       51,999  
Caballito Nuevo (2)
    2,660       441       5,473       -  
El Encuentro (3)
    1,665       1,680       4,432       1,486  
Plots of land receivable Pereiraola (5)
    -       8,200       -       8,200  
Abril
    358       727       1,085       -  
Other inventories
    867       -       989       -  
      26,698       63,253       11,979       61,685  

(1)  See Note 16.11.

(2) In May 2006, Koad S.A. (“Koad”) and the Company entered into an asset exchange agreement valued at US$ 7.5 million pursuant to which the Company delivered to Koad a parcel in Caballito for the construction of a building complex to be named “Caballito Nuevo”. As consideration therefore, Koad S.A. made a down payment of US$ 0.05 million and agreed to cancel the US$ 7.4 million balance by delivering 118 apartments and 55 parking spaces. To secure this transaction, Koad raised a US$ 7.5 million mortgage on the parcel that constitutes its subject matter and posted a surety bond for US$ 1.0 million. On October 15, 2010, Koad conveyed to IRSA full title, possession and ownership over the units agreed in the barter deed and the security interests that had been set up in that respect were cancelled.

During the fiscal year ended on June 30, 2011, several sale agreements had been subscribed, which measured the properties at their net realizable value and for which all deeds have been issued. During the six-month period ended on December 31, 2011 and 2010, Ps. 421 and Ps. 3,626, respectively, were generated on this concept. As of December 31, 2011 the sale had been perfected upon execution of the deed of conveyance of 106 units and 42 parking spaces for which the respective preliminary sales agreements had been signed.

(3) In March 2004, the Company sold (through subsidiaries) a parcel in Benavidez to Desarrolladora El Encuentro S.A. (DEESA) in exchange for (i) US$ 1.0 million in cash and (ii) 110 residential lots in the parcel to be subdivided by DEESA for US$ 3 million. On December 22, 2009 DEESA delivered the residential lots. During the fiscal year ended on June 30, 2011, several sale agreements were subscribed and the corresponding deeds have been issued. During the six-month period ended December 31, 2011, an additional sale agreement which measured the properties at their net realizable value was subscribed,  generating a result of Ps. 338 on that concept. As of December 31, 2011 the property rights had been recorded as public deed for 77 residential lots.

(4)  Investment property. See Note 16.1.

(5) See Note 16.3.

 
- 98 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 6:                 TRADE ACCOUNTS PAYABLE

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Related parties (Note 12.a.) (Exhibit G)
    6,985       6,252  
Suppliers (Exhibit G)
    5,504       5,629  
Accruals
    6,092       6,746  
Others
    195       107  
      18,776       18,734  


NOTE 7:                 CUSTOMER ADVANCES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
Customer advances (Exhibit G)
    7,539       3,632  
Leases and services advances
    11       1,339  
      7,550       4,971  


NOTE 8:                 SHORT-TERM AND LONG–TERM DEBT

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Bank overdrafts
    394,042       -       365,198       -  
Bank loans (Exhibit G) (1)
    140,945       28,887       108,968       27,585  
Non-convertible Notes -2017 (Note 17 and Exhibit G)(2)
    21,990       641,956       20,960       612,419  
Non-convertible Notes -2020 (Note 17 and Exhibit G)(3)
    32,287       627,467       30,800       598,116  
      589,264       1,298,310       525,926       1,238,120  

 
(1)
Balances as of December 31, 2011 includes:
a)  
Ps. 30,103 under current balances and Ps. 28,887 under long-term balances in relation to the debt for purchase the Republica building (Exhibit G).
b)  
Ps. 60,713 as current loans granted by Banco Provincia due in May and July, 2012, and accruing interest at a fixed rate of 14% per annum.
c)  
Ps. 50,129  as current loan granted by Banco Nación due in November 2012 at a nominal Badlar rate plus 400 basic points.
 
(2)
It is disclosed net of issuance expenses for Ps. 874 current and Ps. 3,644 non-current as of December 31, 2011 and Ps. 874 current and Ps. 4,081 non-current as of June 30, 2011.
 
(3)
It is disclosed net of issuance expenses for Ps. 710 current and Ps. 5,328 non-current as of December 31, 2011 and Ps. 710 current and Ps. 5,683 non-current as of June 30, 2011.

 
- 99 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 9:                 TAXES PAYABLES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Provision on tax on Shareholders’ personal assets
    4,199       -       3,668       -  
MPIT, net
    604       5,743       -       -  
VAT, net
    1,424       -       3,965       -  
Tax retentions to third parties
    1,299       -       1,051       -  
Gross revenue tax
    342       -       555       -  
Tax facilities for gross revenue tax
    106       168       128       222  
Tax facilities for municipal taxes
    142       260       142       331  
Deferred income tax (Note 15)
    -       5,859       -       41,256  
Other taxes
    178       -       572       -  
      8,294       12,030       10,081       41,809  


NOTE 10:                   OTHER LIABILITIES

The breakdown for this item is as follows:

   
December 31, 2011
   
June 30, 2011
 
   
Current
   
Non-current
   
Current
   
Non-current
 
Related parties (Note 12.a. and Exhibit G)
    40,224       50,472       11,670       55,139  
Directors’ fees provision (Note 12.a.) (1)
    5,189       -       5,508       -  
Administration and reserve funds
    3,604       -       2,975       -  
Guarantee deposits (Exhibit G)
    2,884       5,576       2,479       4,873  
Present value
    -       (93 )     -       (95 )
Operations to liquidate (Note 22)
    876       -       -       -  
Others
    1,237       195       1,224       195  
      54,014       56,150       23,856       60,112  

 
(1)
As of December 31,  and June 30, 2011 is disclosed net of advances to Directors for Ps. 4,566 and Ps. 17,935, respectively.


 
- 100 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 11:                      OTHER EXPENSES, NET

The breakdown for this item is as follows:

   
December 31,
2011
   
December 31,
 2010
 
Other income:
           
Recovery of allowances
    294       -  
Others
    1,669       18  
Subtotal
    1,963       18  
                 
Other expenses:
               
Donations
    (2,051 )     (3,646 )
Tax on Shareholders´ personal assets
    (1,948 )     (2,295 )
Unrecoverable VAT
    (19 )     (559 )
Lawsuits contingencies  (1)
    (4,460 )     (121 )
Others
    (500 )     (51 )
Subtotal
    (8,978 )     (6,672 )
Total Other expenses, net
    (7,015 )     (6,654 )

 
(1)
As of December 31, 2011 and 2010 includes Ps. 31 and Ps. 104, corresponding to legal expenses and provisions.


 
- 101 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
 
NOTE 12:
BALANCES AND TRANSACTIONS WITH SUBSIDIARIES, SHAREHOLDERS, AFFILIATED AND RELATED PARTIES
a.  
The balances as of December 31 and June 30, 2011 with subsidiaries shareholders, affiliated and related companies are as follows:
 
Related parties
 
Current
Investments
   
Non-current Investments
   
Account receivable, net -current
   
Other
receivables -
current
   
Other
receivable -
non-current
   
Inventories
non-current
Units to be received Caballito
   
Trade accounts
payable -
current
   
Other current
liabilities
   
Other non-current
liabilities
   
Total
 
Alto Palermo S.A. (1)
    12,859       136,601       839       1,816       -       -       (2,262 )     (14 )     -       149,839  
Arcos del Gourmet S.A. (1)
    -       -       1       1       -       -       -       -       -       2  
Baicom Networks S.A. (5)
    -       -       2       11       -       -       (8 )     (47 )     -       (42 )
Banco Hipotecario S.A. (3)
    -       -       -       -       -       -       (1,044 )     -       -       (1,044 )
Cactus Argentina S.A. (3)
    -       -       3       -       -       -       -       -       -       3  
Canteras Natal Crespo S.A. (5)
    -       -       867       97       -       -       -       -       -       964  
Consorcio Dock del Plata (4)
    -       -       -       -       -       -       (76 )     -       -       (76 )
Consorcio Libertador (4)
    -       -       31       25       -       -       (23 )     (4 )     -       29  
Consorcio Torre Boston (4)
    -       -       37       199       -       -       (141 )     -       -       95  
Consultores Assets Management S.A. (4)
    -       -       2,033       29       -       -       (5 )     -       -       2,057  
Cresud S.A.C.I.F. y A. (2)
    -       -       -       10,557       -       -       -       (3,945 )     -       6,612  
Cyrsa S.A. (5)
    -       -       35       439       -       -       (46 )     -       -       428  
Directors (4)
    -       -       -       156       -       -       (49 )     (5,189 )     (8 )     (5,090 )
E-Commerce Latina S.A. (1)
    -       -       1       -       -       -       -       (309 )     (6,966 )     (7,274 )
Emprendimiento Recoleta S.A. (1)
    -       -       -       -       -       -       (1 )     -       -       (1 )
Estudio Zang, Bergel & Viñes (4)
    -       -       -       47       -       -       (227 )     -       -       (180 )
Fibesa S.A. (1)
    -       -       126       16       -       -       (5 )     -       -       137  
Fundación IRSA (4)
    -       -       27       2       -       -       (1 )     -       -       28  
Futuros y opciones S.A. (3)
    -       -       -       -       -       -       (2 )     -       -       (2 )
Hersha Hospitality Trust (3)
    -       -       -       148       -       -       -       -       -       148  
Hoteles Argentinos S.A. (1)
    -       -       1       53       -       -       -       (863 )     -       (809 )
IMadison LLC (1)
    -       -       -       774       -       -       -       -       -       774  
Inversora Bolívar S.A. (1)
    -       -       -       34       -       -       (27 )     (173 )     (7,274 )     (7,440 )
IRSA International LLC (1)
    -       -       -       767       -       -       (575 )     -       -       192  
Jiwin S.A. (1)
    -       -       -       1       -       -       -       -       -       1  
Llao Llao Resorts S.A. (1)
    -       -       1,965       7,791       -       -       (1 )     -       (8 )     9,747  
Museo de los niños (4)
    -       -       30       -       -       -       (3 )     -       -       27  
New Lipstick LLC (3)
    -       -       -       1,001       -       -       -       -       -       1,001  
Nuevas Fronteras S.A. (1)
    -       -       107       1       -       -       (30 )     (33,871 )     -       (33,793 )
Palermo Invest S.A. (1)
    -       -       -       5       -       -       -       (223 )     -       (218 )
Panamerican Mall S.A. (1)
    -       -       15       72       -       -       -       -       -       87  
Loans granted to employees (4)
    -       -       -       640       -       -       (22 )     -       -       618  
Puerto Retiro S.A. (5)
    -       -       118       18       -       -       (11 )     -       -       125  
Quality Invest S.A. (5)
    -       -       355       -       -       -       (37 )     (112 )     -       206  
Real Estate Investment Group LP (1)
    -       -       -       919       -       -       -       -       -       919  
Real Estate Investment Group LP V (1)
    -       -       -       10       -       -       -       -       -       10  
Real Estate Strategies LP (1)
    -       -       -       10       -       -       -       -       -       10  
Ritelco S.A. (1)
    -       -       5       -       -       -       -       (663 )     (36,216 )     (36,874 )
Solares de Santa María S.A. (1)
    -       -       2,393       52       2,855       -       -       -       -       5,300  
Tarshop S.A. (3)
    -       -       333       6       -       -       -       -       -       339  
TGLT S.A. (3)
    -       -       1,634       -       -       52,205       (2,389 )     -       -       51,450  
Torodur S.A. (1)
    -       -       11       124       -       -       -       -       -       135  
Tyrus S.A. (1)
    -       -       28       20       -       -       -       -       -       48  
Unicity S.A. (1)
    -       -       1       -       -       -       -       -       -       1  
Totals as of December 31, 2011
    12,859       136,601       10,998       25,841       2,855       52,205       (6,985 )     (45,413 )     (50,472 )     138,489  

 
- 102 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
 
NOTE 12:
(Continued)
 
a.
(Continued)
Related parties
 
Current
Investments
   
Non-current
Investments
   
Account receivable – net current
   
Other
 receivables -
current
   
Other
receivables -
non current
   
Inventories
non current
Units to be received Caballito
   
Trade accounts
payable -
current
   
Other current
liabilities
   
Other
 – non current liabilities
   
Total
 
Alto Palermo S.A. (1)
    19,228       130,444       2,148       595       -       -       (1,858 )     (10 )     -       150,547  
Arcos del Gourmet S.A. (1)
    -       -       1       1       -       -       -       -       -       2  
Baicom Networks S.A. (5)
    -       -       122       9       -       -       -       -       -       131  
Banco Hipotecario S.A. (3)
    -       -       -       -       -       -       (252 )     -       -       (252 )
Cactus Argentina S.A. (3)
    -       -       3       -       -       -       -       -       -       3  
Canteras Natal Crespo S.A. (5)
    -       -       804       83       -       -       -       -       -       887  
Consorcio Dock del Plata (4)
    -       -       -       -       -       -       -       -       -       -  
Consorcio Libertador (4)
    -       -       139       16       -       -       (63 )     (4 )     -       88  
Consorcio Torre Boston (4)
    -       -       1,076       344       -       -       (836 )     -       -       584  
Consultores Assets Management S.A. (4)
    -       -       986       29       -       -       (4 )     -       -       1,011  
Cresud S.A.C.I.F. y A. (2)
    -       -       -       7,614       -       -       -       (4,906 )     -       2,708  
Cyrsa S.A. (5)
    -       -       3,344       21       -       -       (2,169 )     -       -       1,196  
Directors (4)
    -       -       -       155       -       -       -       (5,508 )     (8 )     (5,361 )
E-Commerce Latina S.A. (1)
    -       -       -       1       -       -       -       (297 )     -       (296 )
Emprendimiento Recoleta S.A. (1)
    -       -       -       -       -       -       (4 )     (2 )     -       (6 )
Estudio Zang, Bergel & Viñes (4)
    -       -       -       9       -       -       (431 )     -       -       (422 )
Fibesa S.A. (1)
    -       -       50       10       -       -       (8 )     -       -       52  
Fundación IRSA (4)
    -       -       28       1       -       -       (1 )     -       -       28  
Futuros y opciones S.A. (3)
    -               1       -       -       -       (2 )     -       -       (1 )
Hersha Hospitality Trust (3)
    -       -       -       142       -       -       -       -       -       142  
Hoteles Argentinos S.A. (1)
    -       -       1       53       -       -       -       (825 )     -       (771 )
IMadison LLC (1)
    -       -       -       714       -       -       -       -       -       714  
Inversora Bolívar S.A. (1)
    -       -       -       5       -       -       (25 )     (134 )     -       (154 )
IRSA International LLC (1)
    -       -       -       670       -       -       (549 )     -       -       121  
Llao Llao Resorts S.A. (1)
    -       -       1,897       1,041       -       -       -       -       (7 )     2,931  
Museo de los niños (4)
    -       -       29       -       -       -       (3 )     -       -       26  
New Lipstick LLC (3)
    -       -       -       842       -       -       -       -       -       842  
Nuevas Fronteras S.A. (1)
    -       -       102       1       -       -       (14 )     (5,037 )     -       (4,948 )
Palermo Invest S.A. (1)
    -       -       -       4       -       -       -       (210 )     -       (206 )
Panamerican Mall S.A. (1)
    -       -       37       3       -       -       (1 )     -       -       39  
Loans granted to employees (4)
    -       -       -       421       -       -       (21 )     -       -       400  
Puerto Retiro S.A. (5)
    -       -       116       1       -       -       (11 )     -       -       106  
Quality Invest S.A. (5)
    -       -       1,597       483       -       -       -       (32 )     -       2,048  
Real Estate Investment Group LP (1)
    -       -       -       9,171       -       -       -       -       -       9,171  
Real Estate Investment Group LP IV (1)
    -       -       -       34,605       -       -       -       -       -       34,605  
Real Estate Investment Group LP V (1)
    -       -       -       9       -       -       -       -       -       9  
Real Estate Strategies LP (1)
    -       -       -       9       -       -       -       -       -       9  
Ritelco S.A. (1)
    -       -       -       4       -       -       -       (213 )     (55,124 )     (55,333 )
Shopping Neuquén S.A. (1)
    -       -       -       1       -       -       -       -       -       1  
Solares de Santa María S.A. (1)
    -       -       1,979       48       2,851       -       -       -       -       4,878  
Tarshop S.A. (3)
    -       -       113       -       -       -       -       -       -       113  
TGLT S.A. (3)
    -       -       658       1,680       -       51,999       -       -       -       54,337  
Torodur S.A. (1)
    -       -       10       113       -       -       -       -       -       123  
Tyrus S.A. (1)
    -       -       26       6       -       -       -       -       -       32  
Unicity S.A. (1)
    -               18       -       -       -       -       -       -       18  
Totals as of June 30, 2011
    19,228       130,444       15,285       58,914       2,851       51,999       (6,252 )     (17,178 )     (55,139 )     200,152  
 
- 103 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 12:
(Continued)

 
b.
Results on subsidiary, shareholder, affiliated and related parties during the period ended December 31, 2011 and 2010 are as follows:

Related parties
 
Sale and services fees
   
Leases
   
Interest
Income
   
Donations
   
Fees
   
Interest
expense
   
Total
 
Alto Palermo S.A. (1)
    154       2,462       7,455       -       (1,228 )     -       8,843  
Canteras Natal Crespo S.A. (5)
    48       -       4       -       -       -       52  
Consultores Assets Management S.A. (3)
    -       59       -       -       -       -       59  
Consorcio Torre Boston (4)
    161       -       -       -       -       -       161  
Cresud S.A.C.I.F. y A. (2)
    -       385       1,481       -       (10,827 )     -       (8,961 )
Consorcio Libertador (4)
    61       7       -       -       -       -       68  
Cyrsa S.A. (5)
    -       8       -       -       -       -       8  
Directors (4)
    -       -       -       -       (9,755 )     -       (9,755 )
E-Commerce Latina S.A. (1)
    3       -       -       -       -       (143 )     (140 )
Estudio Zang, Bergel & Viñes (4)
    -       -       -       -       (1,134 )     -       (1,134 )
Fibesa S.A. (1)
    -       412       -       -       -       -       412  
Fundación IRSA (4)
    -       -       -       (1,283 )     -       -       (1,283 )
Inversora Bolívar S.A. (1)
    -       -       -       -       -       (149 )     (149 )
Llao Llao Resorts S.A. (1)
    -       40       -       -       -       -       40  
Nuevas Fronteras S.A. (1)
    249       -       -       -       -       (744 )     (495 )
Loans granted to employees (4)
    -       -       12       -       -       -       12  
Quality Invest S.A. (5)
    108       -       -       -       -       -       108  
Real Estate Investment Group LP (1)
    -       -       142       -       -       -       142  
Real Estate Investment Group IV (1)
    -       -       270       -       -       -       270  
Ritelco S.A. (1)
    -       -       -       -       -       (483 )     (483 )
Tarshop S.A. (3)
    110       1,410       -       -       -       -       1,520  
Totals as of December 31, 2011
    894       4,783       9,364       (1,283 )     (22,944 )     (1,519 )     (10,705 )


 
- 104 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 12:
(Continued)

 
b.
(Continued)

Related parties
 
Sale and services fees
   
Leases
   
Costs of services
   
Interest
Income
   
Donations
   
Fees
   
Interest
expense
   
Total
 
Alto Palermo S.A. (1)
    -       2,237       -       11,218       -       (641 )     (722 )     12,092  
Canteras Natal Crespo S.A. (5)
    48       -       -       4       -       -       -       52  
Cresud S.A.C.I.F. y A. (2)
    -       339       -       908       -       (8,341 )     (4,760 )     (11,854 )
Consorcio Dock del Plata (4)
    78       -       -       -       -       -       -       78  
Consorcio Libertador (4)
    61       6       -       -       -       -       -       67  
Consorcio Torre Boston (4)
    161       -       (2,966 )     -       -       -       -       (2,805 )
Consultores Assets Management S.A. (4)
    -       11       -       -       -       -       -       11  
Cyrsa S.A. (5)
    -       8       -       -       -       -       -       8  
Directors (4)
    -       -       -       -       -       (14,666 )     -       (14,666 )
E-Commerce Latina S.A. (1)
    3       -       -       413       -       -       -       416  
Estudio Zang, Bergel & Viñes (4)
    -       -       -       -       -       (1,498 )     -       (1,498 )
Fibesa S.A. (1)
    19       360       -       -       -       -       -       379  
Fundación IRSA (4)
    -       -       -       -       (1,739 )     -       -       (1,739 )
Inversora Bolivar S.A. (1)
    -       -       -       397       -       -       -       397  
Llao Llao Resorts S.A. (1)
    -       38       -       612       -       -       -       650  
Nuevas Fronteras S.A. (1)
    415       -       -       -       -       -       (120 )     295  
Palermo Invest S.A. (1)
    -       -       -       119       -       -       (5 )     114  
Quality Invest S.A. (5)
    -       -       -       81       -       -       -       81  
Ritelco S.A. (1)
    -       -       -       275       -       -       (483 )     (208 )
Solares de Santa María S.A. (1)
    -       -       -       693       -       -       -       693  
Tarshop S.A. (3)
    95       1,222       -       -       -       -       -       1,317  
Tyrus S.A. (1)
    -       -       -       340       -       -       -       340  
Totals as of December 31, 2010
    880       4,221       (2,966 )     15,060       (1,739 )     (25,146 )     (6,090 )     (15,780 )

 
(1)
Subsidiary (direct or indirect).
 
(2)
Shareholders.
 
(3)
Related party (direct or indirect).
 
(4)
Related party.
 
(5)
Direct or indirectly joint control.


 
- 105 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 12:                  (Continued)

 
c.
The composition of gain on equity investees is as follows:

   
(Loss)/Gain
   
(Loss)/Gain
 
   
December 31, 2011
   
December 31, 2010
 
Gain on equity investees
    188,735       186,538  
Amortization of negative goodwill and lower/higher purchase values/acquisition expenses
    3,106       9,250  
Accrual of financial results from notes of APSA (Note 18.1)
    (3,591 )     (5,554 )
Foreign exchange gain on higher value of notes of APSA
    (509 )     (166 )
      187,741       190,068  


NOTE 13:                  EARNINGS PER SHARE
 
Below is a reconciliation between the weighted-average number of common shares outstanding and the diluted weighted-average number of common shares:

   
December 31, 2011
   
December 31, 2010
 
Weighted - average outstanding shares
    578,676       578,676  
Dilutive effect
    -       -  
Weighted - average diluted common shares
    578,676       578,676  
 
Below is a reconciliation between net income of the year and net income used as a basis for the calculation of the diluted earnings per share:

   
December 31, 2011
   
December 31, 2010
 
Net income for calculation of basic earnings per share
    133,052       170,558  
Dilutive effect
    -       -  
Net income for calculation of diluted earnings per share
    133,052       170,558  
Net basic income per share
    0.230       0.295  
Net diluted income per share
    0.230       0.295  

 
- 106 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 14:                  COMMON STOCK

 
a.
Common stock

As of December 31, 2011, common stock was as follows:

 
Par Value
Approved by
Date of record with the Public Registry of Commerce
Body
Date
Shares issued for cash
-
First Meeting for IRSA’s Incorporation
04.05.1943
06.25.1943
Shares issued for cash
16,000
Extraordinary Shareholders´ Meeting
11.18.1991
04.28.1992
Shares issued for cash
16,000
Extraordinary Shareholders´ Meeting
04.29.1992
06.11.1993
Shares issued for cash
40,000
Extraordinary Shareholders´ Meeting
04.20.1993
10.13.1993
Shares issued for cash
41,905
Extraordinary Shareholders´ Meeting
10.14.1994
04.24.1995
Shares issued for cash
2,000
Extraordinary Shareholders´ Meeting
10.14.1994
06.17.1997
Shares issued for cash
74,951
Extraordinary Shareholders´ Meeting
10.30.1997
07.02.1999
Shares issued for cash
21,090
Extraordinary Shareholders´ Meeting
04.07.1998
04.24.2000
Shares issued for cash
54
Board of Directors´ Meeting
05.15.1998
07.02.1999
Shares issued for cash
9
Board of Directors´ Meeting (1)
04.15.2003
04.28.2003
Shares issued for cash
4
Board of Directors´ Meeting (1)
05.21.2003
05.29.2003
Shares issued for cash
172
Board of Directors´ Meeting (1)
08.22.2003
02.13.2006
Shares issued for cash
27
Board of Directors´ Meeting (1)
08.22.2003
02.13.2006
Shares issued for cash
8,585
Board of Directors´ Meeting (1)
12.31.2003
02.13.2006
Shares issued for cash
8,493
Board of Directors´ Meeting (2)
12.31.2003
02.13.2006
Shares issued for cash
4,950
Board of Directors´ Meeting (1)
03.31.2004
02.13.2006
Shares issued for cash
4,013
Board of Directors´ Meeting (2)
03.31.2004
02.13.2006
Shares issued for cash
10,000
Board of Directors´ Meeting (1)
06.30.2004
02.13.2006
Shares issued for cash
550
Board of Directors´ Meeting (2)
06.30.2004
02.13.2006
Shares issued for cash
9,450
Board of Directors´ Meeting (2)
09.30.2004
02.13.2006
Shares issued for cash
1,624
Board of Directors´ Meeting (1)
12.31.2004
02.13.2006
Shares issued for cash
1,643
Board of Directors´ Meeting (2)
12.31.2004
02.13.2006
Shares issued for cash
41,816
Board of Directors´ Meeting (1)
03.31.2005
02.13.2006
Shares issued for cash
35,037
Board of Directors´ Meeting (2)
03.31.2005
02.13.2006
Shares issued for cash
9,008
Board of Directors´ Meeting (1)
06.30.2005
02.13.2006
Shares issued for cash
9,885
Board of Directors´ Meeting (2)
06.30.2005
02.13.2006
Shares issued for cash
2,738
Board of Directors´ Meeting (1)
09.30.2005
02.13.2006
Shares issued for cash
8,443
Board of Directors´ Meeting (2)
09.30.2005
02.13.2006
Shares issued for cash
354
Board of Directors´ Meeting (2)
03.31.2006
12.05.2006
Shares issued for cash
13,009
Board of Directors´ Meeting (1)
03.31.2006
12.05.2006
Shares issued for cash
2,490
Board of Directors´ Meeting (2)
03.31.2006
12.05.2006
Shares issued for cash
40,215
Board of Directors´ Meeting (1)
06.30.2006
12.05.2006
Shares issued for cash
10,933
Board of Directors´ Meeting (2)
06.30.2006
12.05.2006
Shares issued for cash
734
Board of Directors´ Meeting (1)
09.30.2006
11.29.2006
Shares issued for cash
1,372
Board of Directors´ Meeting (2)
09.30.2006
11.29.2006
Shares issued for cash
5,180
Board of Directors´ Meeting (1)
12.31.2006
02.28.2007
Shares issued for cash
6,008
Board of Directors´ Meeting (2)
12.31.2006
02.28.2007
Shares issued for cash
2,059
Board of Directors´ Meeting (1)
03.31.2007
06.26.2007
Shares issued for cash
2,756
Board of Directors´ Meeting (2)
03.31.2007
06.26.2007
Shares issued for cash
8,668
Board of Directors´ Meeting (1)
06.30.2007
10.01.2007
Shares issued for cash
2,744
Board of Directors´ Meeting (2)
06.30.2007
10.01.2007
Shares issued for cash
33,109
Board of Directors´ Meeting (1)
09.30.2007
11.30.2007
Shares issued for cash
53,702
Board of Directors´ Meeting (2)
09.30.2007
11.30.2007
Shares issued for cash
1,473
Board of Directors´ Meeting (1)
12.31.2007
03.12.2008
Shares issued for cash
25,423
Board of Directors´ Meeting (2)
12.31.2007
03.12.2008
 
578,676
     
 
(1)
Conversion of negotiable obligations.
 
(2)
Exercise of options.


 
- 107 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 14:                   (Continued)

b.       Restriction on the distribution of profits

i)  
In accordance with the Argentine Commercial Corporations Law and the Company's By-laws, 5% of the net and realized profit for the year, calculated in accordance with Argentine GAAP plus (less) prior year adjustments must be appropriated, once accumulated losses are absorbed, by resolution of the shareholders to a legal reserve until such reserve equals 20% of the Company's outstanding capital. This legal reserve may be used only to absorb losses.

ii)  
See Note 17.

iii)  
See Note 1.5 w.


NOTE 15:                      INCOME TAX – DEFERRED TAX

The evolution and breakdown of deferred tax assets and liabilities are as follows:

Items
 
Balances
at the
beginning of year
   
Changes
for the
period
   
Balances
at
period-end
 
Deferred assets and liabilities
                 
Cash and Banks
    (2,747 )     (153 )     (2,900 )
Investments
    48,538       2,240       50,778  
Accounts receivable, net
    88       (140 )     (52 )
Other receivables
    (397 )     407       10  
Inventories
    (18,979 )     10,211       (8,768 )
Fixed assets, net
    (97,112 )     (6,845 )     (103,957 )
Tax loss carryfowards
    32,143       24,299       56,442  
Short and long-term debt
    (3,973 )     278       (3,695 )
Salaries and social security payable
    684       3,472       4,156  
Other liabilities
    499       1,628       2,127  
Total net deferred liabilities
    (41,256 )     35,397       (5,859 )

The detail of tax loss carryfowards not expired that have not yet been used as of fiscal year amounts to:

 
- 108 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 15:
(Continued)

Year of generation
 
Amount
   
Statute of Limitation
 
2011
    48,966       2016  
2012
    112,297       2017  
Tax loss carryforwards
    161,263          

Below is a reconciliation between income tax expensed and that resulting from application of the current tax rate to pre-tax income for the periods ended December 31, 2011 and 2010, respectively:

Items
    12.31.11       12.31.10  
Pretax income
    97,655       160,456  
Statutory income tax rate
    35 %     35 %
Income tax expense at statutory tax rate on pretax income
    34,179       56,160  
Permanent differences at tax rate:
               
- Restatement into constant currency
    1,256       614  
- Amortization of intangible assets
    (3,153 )     1,442  
- Results on equity investees
    (63,768 )     (66,524 )
- Donations
    718       1,276  
- Other
    (4,629 )     (3,070 )
- Total income tax charge
    (35,397 )     (10,102 )

Minimum Presumed Income Tax credit recorded by the Company and pending of use as of this period-end amounts to Ps. 65,080. In accordance with the legislation in effect, it can be offset with future taxable income as per the following detail:

Year of generation
 
Amount
   
Statute of Limitation
 
2003
    259       2013  
2004
    69       2014  
2005
    2,362       2015  
2006
    7,697       2016  
2008
    1,609       2018  
2009
    6,604       2019  
2010
    13,659       2020  
2011
    22,101       2021  
2012 Provision
    10,720       2022  

 
- 109 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 15:                   (Continued)

Below is a reconciliation between income tax expensed and that resulting from application of the current tax rate to pre-tax income:

      12.31.11       12.31.10  
Total income tax expense
    (35,397 )     (10,102 )
Less temporary differences:
               
Additions
               
Cash and Banks
    (153 )     -  
Investments
    2,240       -  
Fixed assets, net
    (6,845 )     -  
Salaries and social security payable
    3,472       223  
Tax loss carryfowards
    24,299       13,737  
Short and long-term debt
    -       (2,209 )
Other liabilities
    1,628       -  
Inventories
    -       (9,750 )
Reversals
               
Cash and Banks
    -       201  
Fixed assets, net
    -       8,742  
Investments
    -       (4,601 )
Other receivables
    407       231  
Accounts receivable, net
    (140 )     (328 )
Inventories
    10,211       -  
Short and long-term debts
    278       -  
Other liabilities
    -       844  
Total temporary differences
    35,397       7,090  
Less: Difference between tax return and tax provision
    -       3,012  
Total income tax
    -       -  

The Company in accordance with the accounting standards (See Res. Gral. CNV 485/05 y 487/06) has decided not to recognize the deferred income tax liability generated by the effect of the adjustment for inflation on the fixed assets and other non-monetary assets. The estimated effect as of the date of the issuance of these financial statements that the adoption of this criteria would have generated would be a decrease in shareholders’ equity of approximately Ps. 140.2 million which should be recorded in the retained earnings for Ps. 141.8 million (loss) and in the income statement accounts of the fiscal year Ps. 1.6 million (gain). This effect includes those generated by subsidiaries.

The above-mentioned liability would probably be reverted according to the detail that follows:

Item
 
Up to 12 months
   
From 1 to 2 years
   
From 2 to 3 years
   
Over 3 years
   
Total
 
Amount in million
    13.6       13.7       13.5       99.4       140.2  

 
- 110 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



 
NOTE 16:ACQUISITIONS, SALE, CONSTITUTIONS AND REORGANIZATIONS OF BUSINESS AND REAL STATE ASSETS

 
1.
Sales of Buildings

On July 7, 2011, the Company subscribed a sale agreement of some offices at Libertador 498. The agreed total price is US$ 2.5 million to be paid as per the following: a) US$ 0.75 million at the time of subscription of the sale agreement, b) US$ 1.38 million at the time of recording the public deed and granting possession, c) US$ 0.37 million, on April 27, 2012. To secure the payment of the balance, the purchaser constituted a first-degree privilege mortgage on the property, in favor of the Company. On October 17, 2011, the Company issued the deed. The result for this transaction amounts to Ps. 8.1 million.

On September 7, 2011, the Company subscribed a sale agreement of the property “Thames”. The total transaction price amounts to US$ 4.7 million. Out of this total, US$ 1.0 million have been collected at the time of subscription, and the balance of US$ 3.7 million were collected at the time of recording the public deed and granting possession, which took place on October 25, 2011. The result for this transaction amounts to US$ 3.8 million.

On December 20, 2011, the Company subscribed a sale agreement of some offices from the property known as "Museo Renault" at Libertador 498. Figueroa Alcorta 3301. The total price agreed is US$ 5.2 million payable in the following way: a) US$ 1.56 million when the agreement is subscribed; and b) US$ 3.64 million when the deed is granted, set for March 5, 2012. As of December 31, 2011, the Company recorded a gain of US$ 3.8 million which stems from measuring the units at their net realizable value, while the real estate is disclosed under “Inventory” in accordance with disclosure policies.

The properties mentioned above were classified as investment properties until the above mentioned transactions were executed, which represents a gross lease area of approximately 35,175 square meters.

During the six-month period ended on December 31, 2010, no buildings were sold.

 
2.
Option to acquire an interest in Alto Palermo S.A. (APSA)

In January 2010, the Company submitted a bid, which Parque Arauco S.A. (PASA) accepted, for acquiring, through a purchase option, the 29.55% interest held by PASA in APSA and the direct and indirect interest held by PASA in the Series I Convertible Notes issued in due time by APSA (“APSA’s Convertible Note 2014”) for a nominal value of US$ 15.5 million.

 
- 111 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 16:
(Continued)

 
2.
(Continued)

The acceptance of the bid granted the Company the right to exercise the purchase option mentioned above until August 31, 2010, which term may be extended subject to compliance with certain conditions.

The strike price has been fixed at the total and final amount of US$ 126.0 million. The Company has transferred US$ 6.0 million (non-refundable) to PASA as payment in exchange for the option, to be computed towards cancellation of the final price.

On September 21, 2010, the Company’s Board of Directors resolved to exercise the option, which was consummated on October 15, 2010 through the payment of the price balance and the transfer of the shares. According to the terms of the option, the dividends paid by APSA for the fiscal year ended on June 30, 2010 were deducted from the price.

As a consequence of the transaction, as of December 31, 2011, the Company’s interest in APSA rose from 94.87% (See Note 18.2.).

 
3.
Sale of ownership interest in Pereiraola S.A.I.C.I.F. y A. (Pereiraola)

In June 2010, the Company closed the sale and transfer of Pereiraola shares for US$ 11.8 million, for which initially it has collected US$ 1.94 million. The balance is being paid through a transfer to the name of the Company of the higher of 6% of the marketable lots, or 39,601 square meters in the gated neighborhood that the buyer has agreed to develop in the property owned by Pereiraola, equivalent to US$ 2.1 million and four consecutive, half-yearly installments of US$ 1.94 million each plus an annual 14% interest rate on the balances, which interest shall be paid in the same conditions as principal.

 
4.
Torodur S.A.

In May 2010, the Company acquired a 100% stake in Torodur S.A.’s capital stock for US$ 0.01 million. Later on, the Company transferred a 2% ownership interest to CAM Communications LP (Bermudas) and CAM Communications LP (Delaware), equally, at cost. In June 2011, the Company concluded the sale and transfer of shares of Torodur S.A, for US$ 0.002 million to APSA. As a consequence of this operation the Company does not have any direct holding in Torodur S.A.

On the same date, CAM Communications LP (Bermudas) and CAM Communications LP (Delaware) sold to APSA their holding in Torodur S.A.

 
- 112 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 16:
(Continued)

 
5.
Sale of Torres Jardín IV

On October 25, 2010, the Company executed a preliminary sales agreement whereby it sold the lot at Gurruchaga 220/254/256 street, at the intersection with Murillo street in the Autonomous City of Buenos Aires (Torres Jardín IV). The total price of the transaction had been fixed at US$ 2.9 million and the terms of payment were: US$ 0.9 million to be collected upon signing the preliminary sales agreement and the price balance, US$ 2.0 million, to be collected when possession is conveyed and the title deed over the property is executed, which took place in January 2011.

 
6.
Acquisition of shares in Banco Hipotecario S.A. (BHSA)

On July 26, 2010, in the framework of an offer launched by BHSA’s Board of Directors for the sale to existing shareholders of 36.0 million of its treasury Class D shares in portfolio, BHSA sold approximately 26.9 million of said shares.

Exercising its preemptive right, the Company took part in the offering and acquired 4,352,243 Class D shares totaling Ps. 6.0 million. As a result of this transaction, the Company’s interest in BHSA increased from 5% to 5.29% (without considering treasury shares).

On January 7, 2011, the Company sold to Palermo Invest S.A. the equivalent of 4,352,243 Class D ordinary shares in BHSA for US$ 3.3 million. As a result of the sale, the Company’s interest in BHSA is once again 5% (without considering the treasury shares in portfolio).

 
7.
Acquisition of Unicity S.A.

On September 1, 2010, E-Commerce Latina S.A. (100% subsidiary of the Company) acquired a 100% stake in Unicity S.A. (“Unicity”) for US$ 2.53 million. Unicity’s main assets consists in 31,491,932 shares representative of 10% of the capital stock of Solares de Santa María S.A. and because of which remained a liability to the Company for the balance of the purchase price of US$ 9.1 million. On September 28, 2010 the debt was capitalized and the Company received in exchange for 36,036,000 shares representing 88.61% of Unicity, being held by E-Commerce Latina S.A. the remaining 11.39%.

 
8.
Acquisition of shares in TGLT S.A.

In December 2010, the Company acquired 9,598 non-endorsable, registered, common shares, with right to one vote each and representative of 0.01% of TGLT S.A.’s capital stock. The total price paid was Ps. 0.1 million.

 
- 113 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 16:
(Continued)

9.    Sale of interest in Quality Invest S.A. (Quality)

On March 31, 2011, the Company and Palermo Invest S.A. sold to EFESUL S.A. (“EFESUL”) 50% of the capital stock of Quality. As a result of such sale, Quality became jointly controlled by the Company and EFESUL (See Note 22.A.7. to the Consolidated Financial Statements).

10.  Purchase of Banco de Crédito & Securitización S.A. (“BACS”) shares

On March 10, 2011, the Company signed a stock purchase agreement with International Finance Corporation (IFC) for a total of 796,875 common shares, which represents a 1.28% of BACS capital stock in an aggregate amount of US$ 0.32 million, US$ 0.06 million of which were paid upon execution of the agreement, and the balance of US$ 0.26 million (supported by respective promissory notes) are to be repaid at the time of closing of the transaction, that is within 12 business days as from approval of the transaction by the BCRA, which is still pending.

11.   Caballito plot of land barter (TGLT S.A.)

On June 29, 2011, the Company subscribed an Exchange agreement with TGLT S.A. (TGLT), which granted the property of a piece of land described as lot 1q of block 35, surrounded by the streets Méndez de Andes, Colpayo, Felipe Vallese and Rojas in the neighborhood of Caballito, City of Buenos Aires. In the site, TGLT will develop a building project devoted to housing and offices, which will consist of three buildings with an approximate area of 30,064.4 square meters.

The total Price was settled in US$ 12.8 million. Of the total amount, US$ 0.2 million was paid in money after the deed was executed and the balance shall be cancelled by transferring the property of: (i) a number of apartments to be determined, which represents in all 23.10% of the square meters of the saleable houses; (ii) a number to be determined of complementary units (garages), which represents in all 21.10% of the square meters of the garages; and (iii) in case TGLT builds complementary storage rooms, a number to be determined, which represents 21.10% of the square meters of the storage rooms; of the future real estate that shall form part of the project.

TGLT is committed to build, finish and obtain authorization for the three buildings that shall make up the building project, within 36 to 48 months, to be counted as from the subscription of the agreement. In guarantee of its obligations under the exchange agreement, TGLT constituted in favor of the Company a first-grade privilege mortgage on the real estate for up to US$ 12.8 million (capital) plus interests, cost and other expenses that may apply.

 
- 114 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 16:
(Continued)

12.  
Efanur S.A.

The Company purchased 100% of Efanur S.A.’s shares, a company constituted in the Oriental Republic of Uruguay. As of the date of issuance of these financial statements, the acquired Company had no transactions.


  NOTE 17:
ISSUANCE OF NOTES PROGRAM FOR AN AMOUNT UP TO US$ 450 MILLION

In February 2007, the Company issued Non-convertible Notes (Non-convertible Notes-2017”) for US$ 150 million to become due in February 2017 under the framework of the Global Program for Issuing Non-convertible Notes (“The Program”) in a nominal value of up to US$ 200 million authorized by the National Securities Commission, Non-convertible Notes - 2017 accrue an annual fixed interest rate of 8.5%, payable every six months, starting in August, 2007. The Principal will be fully paid on maturity. Non-convertible Notes - 2017 contain certain covenants including restrictions to pay dividends in accordance with certain limits.

On February 25, 2010, the Board of Directors approved the extension of the maximum nominal value of the Program by an additional US$ 200 million, reaching a total amount of US$ 400 million, as approved by the Company’s General Shareholders’ Meeting held on October 29, 2009.

Within this framework, on July 20, 2010, the Company issued Non-convertible Notes for a nominal value of US$ 150 million (“Class 2 Notes”) maturing on July 20, 2020. The issuance price was 97.838% of the par value and they accrue interest at a nominal interest rate of 11.5% per annum, to be paid semi annually on January 20 and June 20 each year, starting on January 20, 2011. The expenses related to the issuance amounted to Ps. 7.1 million.

On November 2, 2010, the Company’s General Shareholders’ Meeting approved a new expansion of the Program in force for up to a further US$ 50 million bringing it to US$ 450 million.

See Note 24.1.

 
- 115 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 18:
OTHER RELEVANT FACTS

 
1.
Purchase and sale of APSA’s Notes

During fiscal year ended June 30, 2009, the Company bought APSA Notes Series I and II for US$ 39.6 million and US$ 46.5 million, respectively. The total amount paid was US$ 19.3 million and US$ 8.2 million, respectively. These transactions generated results for Ps. 74,285 and Ps. 18,363, respectively. On October 12, 2010, the Company sold APSA’s Series I negotiable obligations through the secondary market for a nominal value of US$ 39.6 million that it had acquired in the course of fiscal 2009. The total amount collected from the transaction was US$ 38.1 million. The difference has been treated as an implicit financial cost of the transaction, which shall accrue and be amortized against income over the term of the notes.

 
2.
Agreement entered into with Cresud over an assignment of rights to APSA shares

On October 15, 2010, the Company and Cresud entered into an agreement to assign rights, whereby the Company assigned to Cresud the voting rights associated to 8,817,259 non-endorsable, registered, common shares of par value Ps. 1 per share and equivalent to 0.70% of APSA’s subscribed capital stock. In exchange, Cresud must pay, as from the third month counted from the date of execution of the agreement, interest equivalent to an annual LIBOR at three months plus 150 basic points rate.

 
3.
Ordinary and Extraordinary Shareholders’ meeting as of October 31, 2011

The following are some of the resolutions adopted by the shareholders’ meeting:

·  
Payment of a dividend exclusively in cash, for Ps. 211,575.

·  
The fees of the Board of Directors for Ps. 23,443.

·  
Allocation of up to 1% of the Company’s equity to the purchase of treasury stocks, with the purpose of implementing the long-term incentive program (See Note 23).

·  
Delegation on the Board of Directors the power to create a Global Issuance Program of simple Corporate Notes, non-convertible into shares, for a maximum outstanding amount of US$ 300 million at any time. (See Note 24.1.)

·  
Renewal of the delegation on the Board of Directors of the power to create the Program for the issuance of VCP as simple corporate notes, non-convertible into shares, for a maximum outstanding amount of US$ 50 million at any time.

 
- 116 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 18:
(Continued)

4.  
Negative working capital

At the period end the Company had posted a Ps. 522,515 deficit in its working capital. The treatment to be afforded to this situation is currently being considered by the Board and the Company’s Management. As mentioned in Note 24.1., as of the date these financial statements are issued, the Company is under the process of issuing long-term Corporate Notes. The Company expects this issue will help to reduce the negative working capital.


NOTE 19:             RESTRICTED ASSETS

1.  
The Company has a pledge on Cyrsa S.A.’s shares, as collateral for the latter’s obligation to transfer the units to be built in the premises located in Av. del Libertador 1755, for the balance of the purchase price.

2.  
The Company carries a mortgage on the property designated as “Edificio República” in connection with the loan granted by Banco Macro for the acquisition of said property.


NOTE 20:
COMPLIANCE WITH CURRENTLY APPLICABLE ENVIRONMENTAL RULES AND REGULATIONS

The Company has assumed a permanent commitment to the sustainable conduct of business in line with currently applicable environmental rules and regulations.


NOTE 21:
TRANSACTIONS PENDING SOLUTIONS BY THE ARGENTINE ANTITRUST COMMISSION

On November 20, 2009, after the sale of the building Edificio Costeros (Dique II), the Company applied to the CNDC for a consultative opinion on whether the Company had to notify that transaction or not. The CNDC stated that there was an obligation to notify the situation. The Company appealed against this decision, but it was confirmed at court. As a consequence, on December 5, 2011, we notified the transaction. As of the date of issuance of these financial statements, the CNDC is analyzing this decision.

In addition, as regards the acquisition of Torre BankBoston (Della Paolera), in August 2007, the Company applied to the CNDC for a consultative opinion as to whether the Company had to notify the transaction. In November 2007, the CNDC stated that there was indeed a duty to notify the transaction. The Company filed an appeal against this decision. The plaintiff resolution was right to CNDC. On November 3, 2010 the sale transaction was notified to the CNDC. On November 10, 2011, through Resolution SCI No. 356, the real estate purchase agreement was authorized.

 
- 117 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 22:
FINANCIAL DERIVATES

During the period the Company entered into transactions with derivative instruments which resulted in an unrealized loss of Ps. 876 and is accounted under "Other financing expense" in the Statement of Income.

The table below lists the derivative financial transactions entered and the recorded amount included in gains/losses for the period:

Futures
Bank
 
Amount
U$S
 
Due date
 
Loss
 
Transactions to be liquidate
               
Purchase of dollars
Banco Itau Argentina S.A.
    2,500  
02/29/12
    (47 )
Purchase of dollars
Standard Bank Argentina S.A.
    3,000  
04/30/12
    (297 )
Purchase of dollars
Banco Itau Argentina S.A.
    2,000  
04/30/12
    (162 )
Purchase of dollars
Banco Itau Argentina S.A.
    3,000  
04/30/12
    (370 )
Loss on derivative financial instruments
              (876 )

As of December 31, 2011, the balance of derivative financial instruments transactions amounts to Ps. 876 and is disclosed under “Other Payables” line item.


NOTE 23:
LONG-TERM INCENTIVE PROGRAM

The Company has developed a long-term shared-based incentive and retaining plan for managers and key personnel, by means of contributions that will be made by the mentioned employees together with the Company.  The Company intends, at its sole decision, to repeat the plan for one or two fiscal years with the same or different conditions, with the possibility of granting a share-based unrestricted extraordinary compensation to be paid uniquely in September 2014.

Participation in this plan comes from an invitation from the Board of Directors and it can be freely accepted by the invited participants. Once an employee accepts their invitation, they will be able to make a single annual contribution (based on their annual bonus). The suggested contribution is up to 7.5% of their bonus, being the Company’s contribution for the first year 10 times the employee’s contribution. Contributions and/or the Company’s shares purchased with these funds will be transferred to vehicles specially constituted with this purpose. The Company’s and employees’ contributions for the following fiscal years will be defined after the fiscal year-end.

 
- 118 -

 
IRSA Inversiones y Representaciones Sociedad Anónima



NOTE 23:
(Continued)

In the future, the participants or their successors will have access to 100% of the Benefit (Company contributions made in its favor) under the circumstances that follow:

·  
if the employee resigns or leaves the Company unexpectedly, he/she will be entitled to the benefit only if 5 years have passed since each contribution was made
·  
retirement
·  
total or permanent disability
·  
Death


NOTE 24:
SUBSEQUENT EVENTS

1.  
Corporate Notes Global Issuing Program for an amount up to US$ 300 million

In the framework of the Corporate Notes Global Issuing Program for a face value of up to US$ 300 million approved by the Shareholders’ Meeting on October 31, 2011, on February 10, 2012, the Company closed the Corporate Notes public offering placement period for a total amount of Ps. 300 million, to be issued in two classes, Class III and IV:

·  
Class III Corporate Notes at Badlar rate plus 249 basis points for a face value of Ps. 153.1 million, to be matured 18 months after the issuing date and to be amortized in 3 consecutive payments within 12, 15 and 18 months.
 

·  
Class IV Corporate Notes at a fixed rate of 7.45% for a face value of US$ 33.8 million (equivalent to Ps. 146.9 million), to be matured 24 months after the issuing date, to be subscribed and paid in Argentine Pesos at the applicable exchange rate, to be matured 24 months after the issuing date and to be amortized in 4 equal and consecutive payments within 15, 18, 21 and 24 months.
 

The funds obtained from the issuing of the Corporate Notes will be allocated to repay short-term debt and to incorporate working capital in Argentina. As of the date of issuance of these financial statements, the Company is finishing the process of issuing the corresponding titles, which will take place on February 14, 2012.


 
- 119 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Fixed assets, net
For the six-month periods beginning on July 1, 2011
and ended December 31, 2011 compared with the year ended June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit A
Items
Value as of
beginning of year
Additions
and transfers
Deductions and
 transfers
Value as of
end of period/year
Depreciation
Allowances for impairment  (2)
Net carrying value as of December 31, 2011
Net
 carrying value
as of June 30, 2011
Accumulated as of  beginning of year
For the period/year
Accumulated as  of end of the period/year
Increases, decreases  and transfers
Amount
(1)
Furniture and fixtures
2,904
6
-
2,910
2,565
-
20
2,585
-
325
339
Machinery, equipment and computer equipment
11,125
274
-
11,399
10,188
-
229
10,417
-
982
937
Leasehold improvements
8,180
-
510
8,690
8,129
-
49
8,178
-
512
51
Vehicles
221
-
-
221
221
-
-
221
-
-
-
Work in progress
2,299
879
(258)
2,920
-
-
-
-
-
2,920
2,299
Advances for fixed assets
1,645
827
(854)
1,618
-
-
-
-
-
1,618
1,645
Subtotal other fixed assets
26,374
1,986
(602)
27,758
21,103
-
298
21,401
-
6,357
5,271
                       
Properties:
                     
Avda. de Mayo 595
7,339
-
-
7,339
3,084
-
117
3,201
-
4,138
4,255
Bouchard 551
160,657
-
-
160,657
12,415
-
1,164
13,579
-
147,078
148,242
Bouchard 710
72,499
-
-
72,499
8,222
-
513
8,735
-
63,764
64,277
Constitución 1111
1,338
-
-
1,338
484
-
21
505
-
833
854
Constitución 1159
8,762
-
-
8,762
-
-
-
-
(2,375)
6,387
6,387
Costeros Dique IV
23,337
-
-
23,337
4,814
-
294
5,108
-
18,229
18,523
Plot of land Catalinas Norte
102,666
5,930
206
108,802
-
-
-
-
-
108,802
102,666
Libertador 498 (5)
17,362
-
(2,891)
14,471
5,338
(895)
209
4,652
-
9,819
12,024
Madero 1020
363
-
-
363
166
-
10
176
-
187
197
Maipú 1300
52,716
-
-
52,716
15,812
-
691
16,503
-
36,213
36,904
Rivadavia 2768
334
-
-
334
143
-
13
156
-
178
191
Sarmiento 517
485
-
-
485
109
-
9
118
(130)
237
244
Suipacha 652
17,010
-
-
17,010
6,526
-
226
6,752
-
10,258
10,484
Torre BankBoston (3)
169,078
-
-
169,078
11,099
-
1,453
12,552
-
156,526
157,979
Museo Renault (4) (5)
8,503
-
(5,163)
3,340
860
(587)
115
388
-
2,952
7,643
Edificio República
230,757
-
-
230,757
15,222
-
2,374
17,596
-
213,161
215,535
Dique IV
67,093
-
-
67,093
4,875
-
1,126
6,001
-
61,092
62,218
Alto Palermo Park
622
-
-
622
80
-
2
82
-
540
542
Intercontinental
113,969
404
396
114,769
35,575
-
2,031
37,606
-
77,163
78,394
Thames (5)
8,955
-
(8,955)
-
5,058
(5,058)
-
-
-
-
3,897
Casona Abril
3,412
-
-
3,412
887
-
101
988
-
2,424
2,525
Subtotal properties
1,067,257
6,334
(16,407)
1,057,184
130,769
(6,540)
10,469
134,698
(2,505)
919,981
933,981
Total as of December 31, 2011
1,093,631
8,320
(17,009)
1,084,942
151,872
(6,540)
10,767
156,099
(2,505)
926,338
-
Total as of June 30, 2011
1,092,847
5,012
(4,228)
1,093,631
131,276
(986)
21,582
151,872
(2,507)
-
939,252
(1)  
The accounting application of the depreciation for the period is set forth in Exhibit H.
(2)  
Disclosed net of depreciation for the period amounting to Ps. 2 (Exhibit H)
(3)  
Includes Ps. 5,377  and Ps. 5,481 as of December  31, and June 30, 2011, respectively, related to goodwill generated in the purchase price allocation  (See Note1.5.I.)
(4)  
Includes Ps.1,127 and Ps. 3,113 as of December  31, and June 30, 2011, respectively, related to goodwill generated in the purchase price allocation  (See Note1.5.I.).
(5)  
See Note16.1.
 
- 120 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Intangible assets
For the six-month periods beginning on July 1, 2011
and ended December 31, 2011 compared with the year ended June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit B

   
Original Value
   
Amortization
             
   
Value as of beginning of year
   
Additions and
transfers
   
Deductions and
transfers
   
Value as of period / year-end
   
Accumulated as of beginning of year
   
For the period / year
   
Accumulated as of end of the period / year-end
             
   
Additions and deductions and transfers
   
Amount (1)
   
Net carrying value as of December 31,2011
   
Net carrying value as of June 30, 2011
 
Project development expenses
    294       -       -       294       253       -       -       253       41       41  
Total as of December 31,2011
    294       -       -       294       253       -       -       253       41          
Total as of June 30, 2011
    7,841       -       -       7,841       7,120       -       680       7,800               41  

(1)  
Amortizations are disclosed in Exhibit H.
 

 
- 121 -

 
IRSA Inversiones y Representaciones Sociedad Anónima


Shares and other securities issued in series
Interest in other companies
Unaudited Balance Sheets as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
  Exhibit C
 
                           
Issuer’s information (1)
(1) Interest in capital stock
                               
Last financial statement
Issuer and types of securities  
Currency
 
P.V.
   
Amount
   
Book value at December 31, 2011
   
Book value at June 30, 2011
    Main activity   Legal address  
Date
 
Capital stock (par value)
 
Income – (loss) for the period
 
Shareholder’ equity
Current  investments
                                       
Boden 2012 (Exhibit G) (2)
US$
    0.001       600       1       2                
Boden 2013 (Exhibit G) (2)
US$
    0.001       5,150       12       10                
Mortgage bonds (2)
 $     -       -       -       -                
Total as of December 31, 2011
                      13                        
Total as of June 30, 2011
                              12                



(1)  
Not informed because the equity interest is less than 5%.
(2)  
Not considered as cash for statement of cash flows purposes.



 
- 122 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Shares and other securities issued in series
Interest in other companies
Unaudited Balance Sheets as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit C (Continued)
                            Issuer's Information         
                                  Last Financial Statement         
 
Issuer and types
of securities
 
Class
 
P.V.
   
Amount
   
Book value at December 31, 2011
   
Book value at June 30, 2011
   
Main activity
 
Legal address
 
Date
    Capital stock (par value)     Income – (loss) for the period    
Shareholders’ equity
    Interest in capital stock  
Palermo Invest S.A.
Common 1 vote
    0.001       152,649,263       172,329       163,756  
Investment
Bolívar 108 floor 1, Buenos Aires
    12.31.11       152,649       8,573       172,379       100.00 %
 
Irrevoc. Contrib.
                    50       -                                              
 
Higher Inv. Value
                    5,147       5,147                                              
 
Purchase expenses
                    330       332                                              
 
Eliminations
                    (29,035 )     (29,987 )                                            
                                                                               
Hoteles Argentinos S.A.
Common 1 vote
    0.001       15,366,841       19,799       19,041  
Hotel operations
Av. Córdoba 680, Buenos Aires
    12.31.11       19,209       947       24,749       80.00 %
 
Higher Inv. Value
                    1,095       1,161                                              
 
Purchase expenses
                    27       28                                              
                                                                               
Alto Palermo S.A. (1)
Common 1 vote
    0.001       120,407,124       928,835       866,968  
Real estate investments
Moreno 877 floor 22, Buenos Aires
    12.31.11       125,989       160,258       955,883       94.87 %
 
Goodwill
                    (362,038 )     (341,735 )                                            
 
Higher Inv. Value
                    509,202       488,094                                              
 
Eliminations
                    (3,902 )     (4,314 )                                            
                                                                               
Llao Llao Resorts S.A.
Common 1 vote
    0.001       73,580,206       44,067       52,144  
Hotel operations
Florida 537 floor 18, Buenos Aires
    12.31.11       147,160       (16,154 )     88,135       50.00 %
 
Purchase expenses
                    131       138                                              
                                                                               


 
- 123 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Shares and other securities issued in series
Interest in other companies
Unaudited Balance Sheets as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit C (Continued)
                                     Issuer's Information          
                                            Last Financial Statement            
Issuer and types
of securities
Class    
P.V.
 
     
Amount
 
     
Book value at December 31, 2011
     
Book value at June 30, 2011
 
   
Main activity
 
Legal address
   
Date
 
      Capital stock (par value)        Income – (loss) for the period       
Shareholders’ equity
 
      Interest in capital stock   
Banco de Crédito & Securitización S.A.
Common 1 vote.
    0.001       3,187,500       6,633       6,117  
Banking
Tte Gral Perón 655, Buenos Aires
    12.31. 11       62,500       8,063       129,839       5.10 %
                                                                               
                                                                               
Ritelco S.A.
Common 1 vote
    0.001       181,016,717       243,759       242,106  
Investment
Zabala 1422, Montevideo
    12.31. 11       66,970       1,653       271,099       100.00 %
 
Irrevoc. Contrib.
                    27,340       27,340    
Uruguay
                                       
 
Eliminations
                    (183 )     (190 )                                            
                                                                               
Banco Hipotecario S.A. (2)
Common 1 vote
    0.001       75,000,000       167,406       158,397  
Banking
Reconquista 151  floor 1
    12.31. 11       1,500,000       251,517       3,212,375       5.00 %
 
Goodwill
                    (1,713 )     (1,784 )  
Buenos Aires
                                       
 
Higher Inv. Value
                    9       11                                              
                                                                               
Canteras Natal Crespo S.A.
Common 1 vote
    0.001       2,516,565       310       732  
Extraction and
Caseros 85, Office 33
    12.31. 11       5,033       (844 )     2,034       50.00 %
 
Higher Inv. Value
                    4,842       4,842  
sale of arids
Córdoba
                                       
 
Irrevoc. Contrib.
                    707       435                                              
 
Purchase expenses
                    319       319                                              
                                                                               
Inversora Bolívar S.A.
Common 1 vote
    0.001       78,158,492       227,607       219,746  
Acquisition, building
Bolívar 108 floor 1, Buenos Aires
    12.31. 11       82,159       8,264       239,356       95.13 %
 
Irrevoc. Contrib.
                    95       -                                              
                                                                               
Quality Invest S.A. (7)
Common 1 vote
    0.001       22,059,679       20,089       (18 )
Real estate investments
Bolívar 108 floor 1, Buenos Aires
    12.31. 11       44,119       (3,368 )     40,179       50.00 %
 
Irrevoc. Contrib.
                    -       21,792                                              
                                                                               
                                                                               
E-Commerce Latina S.A.
Common 1 vote
    0,001       82,193,821       193,723       184,496  
Direct or indirect interest
Florida 537 floor 18, Buenos Aires
    12.31. 11       82,194       9,227       193,723       100.00 %
                                   
in companies related to communication but not limited
Buenos Aires
                                       
                                                                               
CYRSA S.A. (4)
Common 1 vote
    0.001       119,608,531       127,442       127,644  
Real estate investments
 
Bolívar 108, floor 1, Buenos Aires°
    12.31. 11       239,217       (405 )     254,884       50.00 %
 
Purchase expenses
                    1       1                                              
 
- 124 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Shares and other securities issued in series
Interest in other companies
Unaudited Balance Sheets as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit C (Continued)
                                      Issuer's Information          
                                            Last Financial Statement            
 
Issuer and types
of securities
 
Class
   
P.V.
      Amount        Book value at December 31, 2011       
Book value at June 30, 2011
   
Main activity
 
Legal address
    Date        Capital stock (par value        Income – (loss) for the period        
Shareholders’ equity
      Interest in capital stock   
Solares de Santa María S.A.
Common 1 vote
    0.001       297,454,165       296,418       296,590  
Real estate investments
Bolívar 108, floor 1°
    12.31.11       328,946       (190 )     328,976       90.43 %
 
Eliminations
                    (166,521 )     (166,521 )  
Buenos Aires
                                       
 
Irrevoc. Contrib.
                    1,085       -                                              
                                                                               
                                                                               
Manibil S.A.
Common 1 vote
    0.001       23,897,880       28,519       27,671  
Real estate investment and building
Av. Del Libertador 498 floor 10 Office 6
    12.31.11       48,772       1,730       58,203       49.00 %
 
Goodwill
                    10       10    
Buenos Aires
                                       
                                                                               
Tyrus S.A.
Common 1 vote
    0.001       2,000,000,000       427,351       420,244  
Investment
Colonia 810/403
    12.31.11       457,690       (12,954 )     591,989       100.00 %
 
Irrevoc. Contrib.
                    164,639       164,639    
Montevideo, Uruguay
                                       
 
Goodwill
                    (46 )     (46 )                                            
 
Purchase expenses
                    21       21                                              
                                                                               
Unicity S.A. (6)
Common 1 vote
    0.001       36,036,001       27,680       27,749  
Investments
Bolívar 108, floor 1
    12.31.11       40,670       (77 )     31,483       88.61 %
 
Irrevoc. Contrib.
                    221       -    
Buenos Aires
                                       
                                                                               
                                                                               
Nuevas Fronteras
Common 1 vote
    0.001       57,256,512       71,106       66,767  
Hotel operations
Moreno 809 floor 2 Buenos Aires
    12.31.11       75,004       5,684       93,148       76.34 %
 
Minor Inv. value
                    (18,555 )     (19,045 )                                            
                                                                               
                                                                               
Advances for share purchases (5)
                      272       259                                              
                                                                               
Total non-current investments as of 12/31/11
                      3,136,623                                                      
Total non-current investments as of 06/30/11
                              3,031,097                                              
(1)  
Quotation price of APSA´s shares at December  31, 2011 Ps. 17,9. Quotation price of APSA´s shares at June 30, 2011 Ps. 23.5. (See Note 18.2. and 16.2.).
(2)  
Quotation price of Banco Hipotecario´s shares at December 31, 2011 Ps. 1.48. Quotation price of Banco Hipotecario´s shares at June 30, 2011 Ps. 2.36. (See Note16.6.)
(3)  
The amounts pertain to the financial statements of Banco Hipotecario S.A. and of Banco de Crédito & Securitización S.A. were prepared in accordance with the Argentine Central Bank requirements. For the purpose of valuating the Company´s investment, the necessary adjustments were considered in order to adjust the financial statements to generally accepted accounting principles in Argentina.
(4)  
See Note22 A.1. to the Unaudited Consolidated Financial Statement
(5)  
See Note16.10. and Exhibit G.
(6)  
See Note16.7.
(7)  
See Note16.9.
 
- 125 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Other investments
Unaudited Balance Sheets as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina

Exhibit D

Items
 
Value as of December 31, 2011
   
Value as of June 30, 2011
 
Others Current  Investments
           
Mutual funds (Exhibit G)
    12,189       20,056  
Stock Shares, in foreign currency (Exhibit G)
    17,107       2,892  
Note APSA 2012 – Accrued interest (Note 12.a.) (1)
    39       77  
APSA Note 2012 (Note 12.a.) (1)
    6,645       13,290  
Convertible Notes APSA 2014 – Accrued interest (Note 12.a. and Exhibit G) (1)
    6,175       5,861  
Total current investments as of December 31, 2011
    42,155       -  
Total current investments as of June 30, 2011
    -       42,176  
                 
Other Non-current Investments
               
Pilar
    3,408       3,408  
Isla Sirgadero, Plot of land
    2,895       2,895  
San Luis, Plot of land
    1,584       1,584  
Intercontinental Plaza
    1,564       1,564  
Puerto Retiro
    1,286       1,286  
Pontevedra, Plot of land
    918       918  
Mariano Acosta, Plot of land
    804       804  
Merlo, Plot of land
    639       639  
Subtotal undeveloped parcels of land
    13,098       13,098  
                 
Convertible Notes APSA 2014 (Note 12.a. and Exhibit G) (1)
    136,601       130,444  
Hersha Hospitality Trust
    8,982       8,169  
TGLT S.A. (Note 16.8)
    86       86  
Other investments
    339       344  
Subtotal other investments
    146,008       139,043  
Total Other non-current Investments as of December 31, 2011
    159,106       -  
Total Other non-current Investments as of June 30, 2011
    -       152,141  

(1)  
See Note 23 A.1. and 23 A.2. to the Unaudited Consolidated Financial Statements and Note 18.1 to the Unaudited Basic Financial Statements.


 
- 126 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Allowances and Reserves
For the six-month periods beginning on July 1, 2011 and
ended December 31, 2011 compared with the year ended June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit E

Items
 
Balances as of beginning of year
   
Additions
   
Deductions
   
Carrying value as of
December 31, 2011
   
Carrying values as of June 30, 2011
 
Deducted from assets:
                             
Allowance for doubtful accounts (1)
    9,822       208       (192 )     9,838       9,822  
Allowance for impairment of fixed assets (2)
    2,507       -       (2 )     2,505       2,507  
Total as of December 31, 2011
    12,329       208       (194 )     12,343          
Total as of June 30, 2011
    13,631       5,741       (7,043 )             12,329  
                                         
Deducted from liabilities:
                                       
Provision for contingencies (3)
    1,082       4,563       (134 )     5,511       1,082  
Total as of December 31, 2011
    1,082       4,563       (134 )     5,511          
Total as of June 30, 2011
    631       488       (37 )             1,082  

(1)  
Increases and decreases are disclosed in Exhibit H and not includes Ps. 151 corresponding to releases.
(2)  
The decreases are related to amortization, disclosed in Exhibit H.
(3)  
Variation is disclosed in Note 11, net.

 
- 127 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Cost of Sales, Leases and Services
For the six-month periods beginning on July 1, 2011and 2010
and ended December 31, 2011 and 2010
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina

Exhibit F

Items
 
Total as of
December 31, 2011
   
Total as of
December 31, 2010
 
I. Cost of sales
           
Stock as of beginning of year
    73,664       91,589  
Plus:
               
Purchases for the period
    444       10  
Expenses (Exhibit H)
    1,298       1,807  
Reversal of Cyrsa
    -       (13,444 )
Caballito plot of land barter (TGLT) (2)
    206       -  
Transfer of Museo Renault
    4,576       -  
Transfer from undeveloped parcels of land
    -       3,030  
Transfer from fixed assets, net - Libertador 498 (1)
    1,996       -  
Transfer from fixed assets, net - Thames (1)
    3,897       -  
Gain from recognition of inventories at net realizable value
    25,031       12,192  
Less:
               
Stock as of period-end
    (89,951 )     (67,644 )
Cost of properties sold
    21,161       27,540  
II. Cost of leases and services
               
Expenses (Exhibit H)
    15,363       14,438  
Cost of leases and services
    15,363       14,438  
Total costs of sales, leases and services
    36,524       41,978  

(1)  
See Note 16.1.
(2)  
See Note 16.11.
A.  
 

 
- 128 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Foreign Currency Assets and Liabilities
Unaudited Balance Sheets as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit G

Items
Currency
 
Amount of foreign currency
   
Current exchange rate(1)
   
Total as of December 31, 2011
   
Total as of
June 30, 2011
 
Assets
                         
Current assets
                         
Cash and Banks
                         
Cash on hand
US$
    2       4.264       8       60  
Cash on hand
Euros
    3       5.534       17       18  
Cash on hand
Pounds
    1       6.627       7       7  
Cash on hand
Real
    1       2.29       2       2  
Banks accounts
US$
    3,746       4.264       15,973       25,507  
Banks accounts
Euros
    279       5.534       1,544       91  
Investments
                                 
Boden 2012
US$
    -       4.264       1       2  
Boden 2013
US$
    2       4.264       12       10  
Mutual funds
US$
    2,841       4.264       12,114       20,056  
Accrued interest Convertible Notes APSA 2014
US$
    1,435       4.304       6,175       5,861  
Stock shares
Euros
    2,134       5.534       11,807       2,892  
Stock shares
US$
    1,243       4.264       5,300       -  
Accounts receivable, net
                                 
Trade receivables, leases receivables and services
US$
    5,925       4.264       25,264       26,766  
Related parties
US$
    449       4.304       1,932       2,464  
Other receivables
                                 
Related parties
US$
    998       4.304       4,295       46,178  
Guarantee deposits
US$
    472       4.264       2,014       -  
Others
US$
    336       4.264       1,433       1,111  
Total current assets
                      87,898       131,025  
Non-current assets
                                 
Accounts receivable, net
                                 
Trade receivables, leases receivables and services
US$
    68       4.264       290       1,885  
Other receivables
                                 
Related parties
US$
    1       4.304       4       -  
Investments
                                 
Convertible Notes APSA 2014
US$
    31,738       4.304       136,601       130,444  
Advance for share purchases (See Note16.10)
US$
    64       4.264       272       259  
Total non-current assets
                      137,167       132,588  
Total Assets as of December 31, 2011
                      225,065          
Total Assets as of June 30, 2011
                              263,613  
                                   
Liabilities
                                 
Current liabilities
                                 
Trade accounts payable
                                 
Trade accounts payable
US$
    507       4.304       2,182       1,056  
Related parties
US$
    930       4.304       4,004       2,475  
Customer advances
US$
    62       4.304       267       2,140  
Short-term debts
US$
    19,973       4.304       85,964       82,072  
Other liabilities
                                 
Related parties
US$
    8,257       4.304       35,538       6,318  
        Guarantee deposits
US$
    594       4.304       2,557       2,082  
Total current liabilities
                      130,512       96,143  
Non-current liabilities
                                 
    Long-term debts
US$
    303,737       4.304       1,307,282       1,247,884  
Other liabilities
                                 
Related parties
US$
    11,723       4.304       50,456       55,124  
Guarantee deposits
US$
    1,265       4.304       5,445       4,743  
Total non-current liabilities
                      1,363,183       1,307,751  
Total Liabilities  as of December 31, 2011
                      1,493,695          
Total Liabilities as of June 30, 2011
                              1,403,894  


(1)      Official selling and buying exchange rate as of December 31, 2011 in accordance with Banco Nación records.
 
- 129 -

 
IRSA Inversiones y Representaciones Sociedad Anónima
Information required by Law 19,550, section 64, paragraph b)
For the six-month periods beginning on July 1, 2011 and 2010
and ended December 31, 2011 and 2010
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit H
 
Items
Total as of
December 31, 2011
Cost of property leased
Cost of properties sold
Expenses
Cost of recovered expenses
Expenses
Total as of December 31, 2010
Administrative
Selling
Financing
Interest
107,136
-
-
(8)
8
-
-
107,136
74,269
Depreciation and amortization
11,555
10,467
-
-
-
298
-
790
12,232
Salaries, bonuses and social security contributions
15,224
642
42
 
5,440
 
(5,440)
 
12,773
 
1,767
 
-
10,428
Fees and payments for services
4,069
40
216
1,046
(1,046)
3,570
243
-
2,942
Directors fees
9,755
-
-
-
-
9,755
-
-
14,666
Bank charges
3,329
-
-
-
-
3,329
-
-
348
Gross revenue tax
2,228
-
-
17
(17)
-
2,228
-
2,592
Maintenance of buildings
4,892
3,639
1,040
5,256
(5,256)
213
-
-
4,302
Commissions and property sales charges
1,691
-
-
1
(1)
-
1,691
-
1,228
Travel expenses
376
-
-
-
-
376
-
-
628
Lease expenses
279
-
-
3,444
(3,444)
279
-
-
227
Caja de Valores and Bolsa de Comercio
254
-
-
-
-
254
-
-
178
Advertising
1,288
-
-
-
-
-
1,288
-
1,120
Traveling, transportation and stationery
250
-
-
9
(9)
219
31
-
278
Subscriptions and publications
636
-
-
67
(67)
636
-
-
315
Utilities and postage
290
226
-
3,254
(3,254)
64
-
-
92
Doubtful accounts
360
-
-
-
-
-
360
-
4,231
Recovery of doubtful accounts
(193)
-
-
-
-
-
(193)
-
(2,046)
Taxes, rates and contributions
1,984
349
-
3,983
(3,983)
1,635
-
-
7,381
Other expenses of personnel administration
576
-
-
145
(145)
576
-
-
762
Insurances
34
-
-
397
(397)
34
-
-
76
Training
105
-
-
-
-
105
-
-
77
Surveillance
1
-
-
3,246
(3,246)
1
-
-
-
Notary expenses
63
-
-
-
-
63
-
-
45
Others
3,250
-
-
77
(77)
688
105
2,457
3,577
Recovery expenses
-
-
-
(26,374)
26,374
-
-
-
-
Total as of December 31, 2011
169,432
15,363
1,298
-
-
34,868
7,520
110,383
-
Total as of December 31, 2010
-
14,438
1,807
-
-
40,358
7,125
76,220
139,948

 
 
- 130 -

 
IRSA Inversiones y Representaciones Sociedad Anónima


Breakdown by maturity date of main assets and liabilities
Unaudited Balance Sheet as of December 31, 2011 and June 30, 2011
In thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina
Exhibit I             
 
 
Without term
With maturity date
Total
Interest
 
Falling due
To due
Total with term
No accrued
Accrued
 
Up to 3 months
From 3 to 6 months
From 6 to 9 months
From 9 to 12 months
From 1 to 2 years
From 2 to 3 years
From 3 to 4 years
From 4 years on
Total to  due
Fixed rate
Variable rate
December 31, 2011
                               
                                 
Assets
                               
Investments
29,818
-
-
6,684
-
-
-
142,776
-
-
149,460
149,460
179,278
23,842
143,247
12,189
Receivables
70,990
11,243
48,647
946
8,354
646
355
524
736
3,249
63,457
74,700
145,690
145,593
97
-
Liabilities
                               
Short and long-term debt
-
-
451,565
58,491
29,604
49,604
28,887
-
-
1,269,423
1,887,574
1,887,574
1,887,574
34,557
1,853,017
-
Other liabilities
15,070
-
46,988
33,323
958
6,201
2,012
7,984
37,178
15,147
149,791
149,791
164,861
81,412
32,985
50,464
                                 
June 30, 2011
                               
                                 
Assets
                               
Investments
23,492
-
5,861
6,722
-
6,645
-
-
130,444
-
149,672
149,672
173,164
9,374
143,734
20,056
Receivables
56,914
25,695
33,545
48,139
9,870
1,882
2,325
361
180
3,156
99,458
125,153
182,067
117,423
64,139
505
Liabilities
                               
Short and long-term debt
-
-
468,386
747
(396)
57,189
26,001
(1,584)
(1,584)
1,215,287
1,764,046
1,764,046
1,764,046
395,876
1,368,170
-
Other liabilities
46,876
-
40,615
6,541
170
8,875
1,835
20,596
38,056
167
116,855
116,855
163,731
102,740
5,861
55,130
                                 

 
 
- 131 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Information required by Section 68 of the Buenos Aires Stock Exchange Regulations
Unaudited Balance Sheet as of December 31, 2011
Stated in thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina

1.
Specific and significant legal systems that imply contingent lapsing or rebirth of benefits envisaged by such provisions.

None.

2.
Significant changes in the Company´s activities or other similar circumstances that occurred during the fiscal years included in the financial statements, which affect their comparison with financial statements filed in previous fiscal years, or that could affect those to be filed in future fiscal years.

See Note 1.4.

3.
Receivables and liabilities by maturity date
 

  Concepts 
Falling due
(Point 3.a.)
Without term
(Point 3.b.)
Without term
(Point 3.b.)
To be due (Point 3.c.)
Total
12.31.2011
Current
Non-current
Up to 3 months
From 3 to 6
months
From 6 to 9
months
From 9 to 12
months
From 1 to 2
years
From 2 to 3
years
From 3 to 4
years
From 4 years on
Receivables
Accounts receivable, net
11,243
-
-
19,642
609
8,059
29
323
7
-
-
39,912
 
Other receivables
-
5,810
65,180
29,005
337
295
617
32
517
736
3,249
105,778
 
Total
11,243
5,810
65,180
48,647
946
8,354
646
355
524
736
3,249
145,690
Liabilities
Trade accounts payable
-
-
-
18,776
-
-
-
-
-
-
-
18,776
 
Customers advances
-
   
7,550
-
-
-
-
-
-
-
7,550
 
Short and long-term debts
-
   
451,565
58,491
29,604
49,604
28,887
-
-
1,269,423
1,887,574
 
Salaries and social security payable
-
   
2,536
-
-
-
-
-
-
-
2,536
 
Taxes payable
-
1,424
5,859
8,860
(1,990)
-
-
428
5,743
-
-
20,324
 
Other liabilities
-
2,276
-
9,266
35,313
958
6,201
1,584
2,241
37,178
15,147
110,164
 
Provisions
-
5,511
-
-
-
-
-
-
-
-
-
5,511
 
Total
-
9,211
5,859
498,553
91,814
30,562
55,805
30,899
7,984
37,178
1,284,570
2,052,435
 

 
- 132 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Information required by Section 68 of the Buenos Aires Stock Exchange Regulations
Unaudited Balance Sheet as of December 31, 2011

Stated in thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina



 
4.a.
Breakdown of accounts receivable and liabilities by currency and maturity
 

Concepts Current  Non-Current  Total 
Local Currency  Foreign Curency Total  Local Currency Foreign Curency Total Local Currency Foreign Curency  Total  
Receivables
Accounts receivable, net
12,386
27,196
39,582
40
290
330
12,426
27,486
39,912
 
Other receivables
28,322
7,742
36,064
69,710
4
69,714
98,032
7,746
105,778
 
Total
40,708
34,938
75,646
69,750
294
70,044
110,458
35,232
145,690
Liabilities
Trade accounts payable
12,590
6,186
18,776
-
-
-
12,590
6,186
18,776
 
Customers advances
7,283
267
7,550
-
-
-
7,283
267
7,550
 
Short and long-term debts
503,300
85,964
589,264
(8,972)
1,307,282
1,298,310
494,328
1,393,246
1,887,574
 
Salaries and social security payable
2,536
-
2,536
-
-
-
2,536
-
2,536
 
Taxes payable
8,294
-
8,294
12,030
-
12,030
20,324
-
20,324
 
Other liabilities
15,919
38,095
54,014
249
55,901
56,150
16,168
93,996
110,164
 
Provisions
5,511
-
5,511
-
-
-
5,511
-
5,511
 
Total
555,433
130,512
685,945
3,307
1,363,183
1,366,490
558,740
1,493,695
2,052,435

 

 
4.b.
Breakdown of accounts receivable and liabilities by adjustment clause

On December 31, 2011 there are not receivable and liabilities subject to adjustment clause.



 
- 133 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Information required by Section 68 of the Buenos Aires Stock Exchange Regulations
Unaudited Balance Sheet as of December 31, 2011

Stated in thousands of pesos
Free translation from the original prepared in Spanish for publication in Argentina



4.c.
Breakdown of accounts receivable and liabilities by interest clause
 
 

  Concepts Current   Non-Current   Accruing Interest    Non Accruing Interest    Total
Accruing Interest    Non Accruing Interest   Total  Accruing Interest    Non Accruing Interest  Total
Fixed Rate  Variable Rate Fixed Rate   Variable Rate Fixed Rate   Variable Rate 
Receivables
Accounts receivable, net
-
-
39,582
39,582
-
-
330
330
-
-
39,912
39,912
 
Other receivables
97
-
35,967
36,064
-
-
69,714
69,714
97
-
105,681
105,778
 
Total
97
-
75,549
75,646
-
-
70,044
70,044
97
-
145,593
145,690
Liabilities
Trade accounts payable
-
-
18,776
18,776
-
-
-
-
-
-
18,776
18,776
 
Customers advances
-
-
7,550
7,550
-
-
-
-
-
-
7,550
7,550
 
Short and long-term debts
532,929
-
56,335
589,264
1,320,087
-
(21,777)
1,298,310
1,853,016
-
34,558
1,887,574
 
Salaries and social security payable
-
-
2,536
2,536
-
-
-
-
-
-
2,536
2,536
 
Taxes payable
-
-
8,294
8,294
-
-
12,030
12,030
-
-
20,324
20,324
 
Other liabilities
32,985
-
21,029
54,014
-
50,464
5,686
56,150
32,985
50,464
26,715
110,164
 
Provisions
-
-
5,511
5,511
-
-
-
-
-
-
5,511
5,511
 
Total
565,914
-
120,031
685,945
1,320,087
50,464
(4,061)
1,366,490
1,886,001
50,464
115,970
2,052,435

 

 
- 134 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

5.  Related parties

a.  Interest in related parties. See Exhibit C to the Unaudited Basic Financial Statements.

b.  Related parties debit/credit balances. See Note 12 to the Unaudited Basic Financial Statements.

6.  Loans to directors

See Note 12.

7.  Inventories

In view of the nature of the inventories, no physical inventories are performed and there are no slow turnover assets.

8.  Current values

See Notes 1.5.c., 1.5.h. and 1.5.i to the Unaudited Basic Financial Statements.

9.  Appraisal revaluation of fixed assets

None.

10.  Obsolete unused fixed assets

None.

11.  Equity interest in other companies in excess of that permitted by section 31 of law N° 19,550

None.

12.  Recovery values

See Notes 1.5.h., 1.5.i., 1.5.j., 1.5.k and 1.5.q. to the Unaudited Basic Financial Statements.

 
- 135 -

 
IRSA Inversiones y Representaciones Sociedad Anónima


13.  
Insurances

Insured Assets

Real Estate
 
Insured amounts (1)
   
Accounting values
 
Risk covered
EDIFICIO REPÚBLICA
    79,637       213,161  
All operational risk with additional coverage and minor risks
BOUCHARD 551
    63,303       147,078  
All operational risk with additional coverage and minor risks
TORRE BANKBOSTON
    69,800       156,526  
All operational risk with additional coverage and minor risks
BOUCHARD 710
    32,716       63,764  
All operational risk with additional coverage and minor risks
LIBERTADOR 498
    3,423       9,819  
All operational risk with additional coverage and minor risks
MAIPU 1300
    21,312       36,213  
All operational risk with additional coverage and minor risks
SUIPACHA 652
    14,084       10,258  
All operational risk with additional coverage and minor risks
DIQUE IV
    5,261       61,092  
All operational risk with additional coverage and minor risks
AVDA. DE MAYO 595
    4,255       4,138  
All operational risk with additional coverage and minor risks
MUSEO RENAULT
    3,212       2,952  
All operational risk with additional coverage and minor risks
MADERO 1020
    179       187  
All operational risk with additional coverage and minor risks
RIVADAVIA 2768
    305       178  
All operational risk with additional coverage and minor risks
CONSTITUCIÓN 1159
    79       6,387  
All operational risk with additional coverage and minor risks
CONSTITUCIÓN 1111
    79       833  
All operational risk with additional coverage and minor risks
SARMIENTO 517
    264       237  
All operational risk with additional coverage and minor risks
CASONA ABRIL
    9,713       2,424  
All operational risk with additional coverage and minor risks
SUBTOTAL
    307,622       715,247    
SINGLE POLICY
    15,000       -  
Third party liability

 
(1)
The insured amounts are in thousands of U.S.dollars.

In our opinion, the above-described insurance policies cover current risks adequately.

14.  
Allowances and provisions that, taken individually or as a whole, exceed 2 % of the shareholder´s equity

None.

15.  
Contingent situations at the date of the financial statements which probabilities are not remote and the effects on the Company´s financial position have not been recognized

Not applicable.

16.  
Status of the proceedings leading to the capitalization of irrevocable contributions towards future subscriptions

 
Not applicable.

17.  
Unpaid accumulated dividends on preferred shares

 
None.

18. 
Restrictions on distributions of profits

 
See Note 14.b. and 17 to the Unaudited Basic Financial Statements.


Autonomous City of Buenos Aires, February 13, 2012.


 
- 136 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Business Overview

In thousands of pesos
Free translation from the original prepared in Spanish for publications in Argentina


1.  
Brief comments on the Company’s activities during the period, including references to significant events after the end of the period.

See attached.


2.  
Consolidated Shareholders’ equity structure as compared with the same period for the four previous years.

      12.31.11       12.31.10       12.31.09       12.31.08       12.31.07  
Current assets
    1,067,046       1,111,793       902,608       718,463       982,900  
Non- current assets
    5,354,975       4,975,162       4,326,528       3,778,106       3,173,074  
Total
    6,422,021       6,086,955       5,229,136       4,496,569       4,155,974  
Current liabilities
    1,401,534       1,330,713       952,535       808,163       558,219  
Non-current liabilities
    2,275,878       1,970,204       1,437,814       1,413,846       1,263,996  
Subtotal
    3,677,412       3,300,917       2,390,349       2,222,009       1,822,215  
Minority interest
    315,304       327,986       510,583       440,036       458,672  
Shareholders´ equity
    2,429,305       2,458,052       2,328,204       1,834,524       1,875,087  
Total
    6,422,021       6,086,955       5,229,136       4,496,569       4,155,974  


3.  
Consolidated result structure as compared with the same period for the four previous years.

      12.31.11       12.31.10       12.31.09       12.31.08       12.31.07  
Operating income
    366,103       300,683       291,842       48,898       141,901  
Amortization of negative goodwill, net
    8,865       1,819       826       1,167       616  
Financial results, net
    (225,542 )     (91,254 )     (48,788 )     (138,972 )     (54,853 )
Gain (Loss) in equity investments
    58,570       73,721       143,130       (47,312 )     (9,066 )
Other expenses, net
    (7,987 )     (15,279 )     (8,446 )     (1,848 )     (4,500 )
Net gain (loss) before taxes
    200,009       269,690       378,564       (138,067 )     74,098  
Income tax / MPIT
    (65,313 )     (49,071 )     (84,662 )     13,607       (46,451 )
Minority interest
    (1,644 )     (50,061 )     (29,589 )     25,445       (21,863 )
Net income (loss) for the period
    133,052       170,558       264,313       (99,015 )     5,784  


 
- 137 -

 
IRSA Inversiones y Representaciones Sociedad Anónima

Business Overview

In thousands of pesos
Free translation from the original prepared in Spanish for publications in Argentina


4.
Statistical data as compared with the same period for the four previous years.

Summary of properties sold in units and in thousands of pesos.

   
As of:
 
      12.31.11       12.31.10       12.31.09       12.31.08       12.31.07  
Apartments & Loft Buildings
                                       
Torre Renoir
    -       -       142       27,831       -  
Torre Renoir II
    -       -       -       -       41,808  
Barrio Chico
    371       -       -       1,968       855  
Torres de Rosario
    3,503       -       -       -       -  
Caballito Nuevo
    7,119       26,560       -       -       -  
Torres de Abasto
    -       -       -       319       295  
Torres Jardín
    -       44       -       513       16  
Horizons
    53,928       -       -       -       -  
Others
    -       -       -       320       49  
                                         
Residential Communities
                                       
Abril
    -       466       4,139       2,531       1,756  
El Encuentro
    7,979       7,202       -       -       -  
Villa Celina I, II and III
    -       -       -       76       -  
                                         
Undeveloped parcel of lands
                                       
Canteras Natal Crespo
    12       12       6       -       21  
Rosario plot of land
    20,587       5,669       -       7,644       3,428  
Dique III
    -       -       -       -       14,783  
Thames
    20,022       -       -       -       -  
C. Gardel 3134
    -       934       -       -       -  
C. Gardel 3128
    -       887       -       -       -  
Beruti plot of land
    -       75,373       -       -       -  
Others
    -       148       -       -       -  
                                         
Others
                                       
Edificios Costeros
    -       -       68,580       -       -  
Dock del Plata
    -       -       34,492       6,438       -  
Libertador 498
    10,600       -       29,982       -          
Torre Bank Boston
    -       -       -       6,850       -  
Madero 940
    -       -       -       6,137       -  
Madero 1020
    -       -       71       -       -  
Others
    45       34       -       3,055          
      124,166       117,329       137,412       63,682       63,011  

 
- 138 -

 
IRSA Inversiones y Representaciones Sociedad Anónima


Business Overview

In thousands of pesos
Free translation from the original prepared in Spanish for publications in Argentina


5.
Key ratios as compared with the same period for the four previous years.

  12.31.11   12.31.10   12.31.09   12.31.08   12.31.07  
Liquidity ratio
                   
Current assets
1,067,046
=0.76
1,111,793
=0.84
902,608
=0.95
718,463
=0.89
982,900
=1.76
Current liabilities
1,401,534 1,330,713 952,535 808,163 558,219
                     
Indebtedness ratio
                   
Total liabilities
3,677,412
=1.51
3,300,917
=1.34
2,390,349
=1.03
2,222,009
=1.21
1,822,215
=0.97
Shareholders´ equity
2,429,305 2,458,052 2,328,204 1,834,524 1,875,087
                     
Solvency
                   
Shareholders´ equity
2,429,305
=0.66
2,458,052
=0.74
2,328,204
=0.97
1,834,524
=0.83
1,875,087
=1.03
Total liabilities
3,677,412 3,300,917 2,390,349 2,222,009 1,822,215
                     
Immobilized  Capital
                   
Non-current assets
5,354,975
=0.83
4,975,162
=0.82
4,326,528
=0.83
3,778,106
=0.84
3,173,074
=0.76
Total assets
6,422,021 6,088,955 5,229,136 4,496,569 4,155,974
                     

6.  
Progress in complying with the IFRS implementation plan.

On April 29, 2010, the Company’s Board of Directors approved a specific plan to implement the IFRS (International Financial Reporting Standards). As established in such plan, the Company has ended training its personnel from its accounting and tax areas, and the personnel from most of its affiliates and related companies. On the other hand, the initial diagnostic process of the difference in standards was finished and the Company is assessing the necessary changes in processes and systems to adequate them to the new requirements as well as the different possible alternatives referred to the measurement and disclosure of certain financial statements items.

As a result of monitoring the specific IFRS implementation plan, the Board of Directors has not become aware of any circumstance requiring amendments to such plan or indicating a significant departure from the proposed goals and terms


7.  
Brief comment on the outlook for the coming period.

See attached.


 
- 139 -

 


Free translation from the original prepared in Spanish for publication in Argentina


Limited Review Report

To the Shareholders, President and Board of Directors of
IRSA Inversiones y Representaciones Sociedad Anónima
C.U.I.T.: 30-52532274-9
Legal address: Bolívar 108 – 1st floor
Autonomous City of Buenos Aires


1.  
We have reviewed the balance sheet of IRSA Inversiones y Representaciones Sociedad Anónima at December 31, 2011, and the related statements of income, of changes in shareholders’ equity and of cash flows for the six-month period ended December 31, 2011 and the supplementary notes 1 to 24 and exhibits A to I. Furthermore, we have reviewed the consolidated balance sheet of IRSA Inversiones y Representaciones Sociedad Anónima with its subsidiaries at December 31, 2011, and the consolidated statements of income and of cash flows for the six-month period ended December 31, 2011, which are presented as supplementary information. These financial statements are the responsibility of the Company’s management.

2.  
We conducted our review in accordance with standards established by Technical Resolution No. 7 of the Argentine Federation of Professional Councils of Economic Sciences for limited reviews of financial statements. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion over the balance sheet, statements of income, of changes in shareholders ´equity and of cash flows and the consolidated financial statements ended December 31, 2011.

3.  
Based on our work and examinations of the financial statements of the Company and the consolidated financial statements for the year ended June 30, 2011 on which we issued our unqualified report on September 8,  2011, we report that:

a)  
the financial statements of IRSA Inversiones y Representaciones Sociedad Anónima at December 31, 2011 and its consolidated financial statements at that date, set out in point 1., prepared in accordance with accounting standards prevailing in the Autonomous City of Buenos Aires, include all significant facts and circumstances of which we are aware and we have no observations to make on them.

 
- 140 -

 

Free translation from the original prepared in Spanish for publication in Argentina

Limited Review Report (Cont.)

b)  
the comparative information at June 30, 2011 included in the basic and consolidated balance sheets and the supplementary notes and exhibits to the attached financial statements arise from the Company´s financial statements at that date.

c)  
the comparative information at December 31, 2010 included in the basic and consolidated statements of income and of cash flows and the supplementary notes and exhibits to the attached financial statements arise from the Company´s audited special financial statements at that date, on which we issued our unqualified report on March 4,  2011.

4.  
In accordance with current regulations we report that:

 
a)
the financial statements of IRSA Inversiones y Representaciones Sociedad Anónima and its consolidated financial statements have been transcribed to the “Inventory and Balance Sheet Book” and comply, as regards those matters that are within our competence, with the Corporations Law and pertinent resolutions of the National Securities Commission;

 
b)
the financial statements of IRSA Inversiones y Representaciones Sociedad Anónima arise from official accounting records carried in all formal respects in accordance with legal requirements;

 
c)
we have read the business highlights, except for the chapter entitled “Progress in complying with the IFRS implementation plan”, and the additional information to the notes to the financial statements required by sect. 68 of the Buenos Aires Stock Exchange Regulations, on which, as regards those matters that are within our competence, we have no observations to make; and

 
d)
at December 31, 2011, the debt accrued in favor of the Argentine Integrated Pension System according to the accounting records amounted to Ps. 300,1 thousands, none of which was claimable at that date.

Autonomous City of Buenos Aires, February 13, 2012.


PRICE WATERHOUSE & Co. S.R.L.
By (Partner)
ABELOVICH, POLANO & ASOCIADOS S.R.L.
By (Partner)
 
Norberto Fabián Montero
 
 
Marcelo Héctor Fuxman
 
 
 


 
- 141 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011

Brief comments on the Company’s activities during the period, including references to significant events occurred after the end of the period.

Buenos Aires, February 13, 2012 - IRSA Inversiones y Representaciones Sociedad Anónima (NYSE: IRS) (BCBA: IRSA), the leading real estate company in Argentina, announces its results for the first six month ended on December 31, 2011.

In ARS million
 
IIQ 12
   
IIQ 11
   
YoY Var
      6M 12       6M 11    
YoY Var
 
Revenues
    395.9       390.9       1.3 %     739.6       697.7       6 %
Operating Income
    202.4       162.7       24.4 %     366.1       300.7       22 %
Depreciation and Amortization
    42.8       39.5       8.4 %     87.0       79.1       10 %
EBITDA1
    245.2       202.2       21.3 %     453.0       379.8       19 %
Income for the Period
    127.4       114.4       11.4 %     133.1       170.6       -22 %

  
The company’s consolidated Revenues for the second quarter of fiscal year 2012 were 6% higher than in the same period of the previous fiscal year. This level of growth is explained by the improvement in the shopping centers and offices revenues, of around 28% and 15%, respectively, offset by a fall in the hotel business and sales and developments.
►  
Operating income grew 24.4% during the second quarter of 2012 due to the improvement in operating margins of our shopping centers and offices business, whereas net income for the fiscal year amounted to ARS 127.4 million, 11.4% higher than in the same period of the previous fiscal year and showing a substantial improvement as compared to the ARS 5.7 million income observed in the last quarter. This improvement is mainly explained by higher income from Banco Hipotecario and an increase in the market value of IRSA’s option in Hersha Hospitality Trust.

In ARS million
 
IIQ 12
   
IIQ 11
   
YoY Var
      6M 12       6M 11    
YoY Var
 
 EBITDA rental segment
    217.2       171.3       26.9 %     413.9       321.1       28.9 %
 EBITDA Consumer Finance
    -1.1       0.3       -466.7 %     2.5       19.9       -87.4 %
EBITDA Sales and Development
    29.0       30.7       -5.5 %     36.6       38.9       -5.9 %
Total EBITDA
    245.2       202.2       21.3 %     453.0       379.8       19.3 %

►  
EBITDA from the rental segments has shown an upward trend of around 27% for the second quarter of fiscal year 2012 as compared to the same period of 2011. For the first six months of fiscal year 2012, EBITDA from the rental segment grew 28.9% as compared to the first six months of 2011, offset by the fall observed in the Sales and Development and Consumer Finance segments. EBITDA grew 19.3%.
 
1 BITDA represents operating income plus depreciation and amortization (included in operating income). Our presentation of EBITDA does not reflect the methodology suggested by its acronym. We believe EBITDA provides investors with meaningful information with respect to our operating performance and facilitates comparisons to our historical operating results. However, our EBITDA measure has limitations as an analytical tool, and should not be considered in isolation, as an alternative to net income or as an indicator of our operating performance or as a substitute for analysis of our results as reported under Argentine GAAP. Some of these limitations include:
· it does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
· it does not reflect changes in, or cash requirements for, our working capital needs;
· it does not reflect our interest expense, or the cash requirements to service the interest or principal payments of our debt;
· it does not reflect any cash income taxes or employees’ profit sharing we may be required to pay;
· it reflects the effect of non-recurring expenses, as well as investing gains and losses;
· it is not adjusted for all non-cash income or expense items that are reflected in restatements of changes in financial position; and
· other companies in our industry could calculate this measure differently than we do, which may limit its usefulness as a comparative measure.
Because of these limitations, our EBITDA measure should not be considered a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. EBITDA is not a recognized financial measure under Argentine GAAP. You should compensate for these limitations by relying principally on our Argentine GAAP results and using our EBITDA measurement supplementally.

 
- 142 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
 
I. Shopping Centers (through our subsidiary Alto Palermo S.A.)

After a year in which the Argentine shopping center industry saw an outstanding performance, the second quarter of fiscal year 2012 experienced significant growth, in line with the levels of economic activity, consumption and inflation observed. Supermarket sales increased 27.2% during the same period2. Consumers’ expectations have improved, as per the index prepared by the Torcuato Di Tella University3, reaching 55.6 points, well above the 52.9 points recorded in the same quarter of 2010. There has also been an improvement in access to consumer credit which, according to statistics published by the Argentine Central Bank4, increased 49% compared to the same quarter of the previous year.

These rising consumption indicators were reflected in our tenants’ sales, which grew 22.1% YoY  during this quarter, resulting in an increase in operating income and EBITDA above 30%.

Shopping Centers
 
                                     
In millions of ARS
 
IIQ 12
   
IIQ 11
   
YoY var
      6M 12(1)       6M 11(1)    
YoY var
 
Revenues
    233.4       181.9       28.3 %     436.0       330.7       31.8 %
Operating Income
    151.9       108.8       39.6 %     280.3       193.5       44.9 %
Depreciation and Amortization
    34.6       30.8       12.3 %     69.1       59.9       15.4 %
EBITDA
    186.5       139.6       33.6 %     349.4       253.4       37.9 %
                                                 
   
IIQ 12
   
IQ 12
   
IVQ 11
   
IIIQ 11
   
IIQ 11
   
IQ 11
 
Total Leasable Area (sqm)
    308,597       307,233       299,326       299,130       299,130       286,286  
Tenants’ Sales
(ARS million, 12-month cumulative)
    8,975       8,316       7,766       6,856       6,277       5,776  
Tenants’ Sales in the same Shopping Centers (ARS million, 12-month cumulative)
    8,689       7,027       6,577       5,868       5,411       5,012  
Occupancy
    97.7 %     97.7 %     97.3 %     97.3 %     97.6 %     97.5 %

(1)  
6 months as of December 31 of each year.

During the second quarter of fiscal year 2012, shopping center tenant sales amounted During the second quarter of fiscal year 2012, shopping center tenant sales amounted to ARS 2,635 million (a 22.1% increase as compared to the same period of the previous year). This increase was led by the strong growth experienced by our shopping centers in the interior of the country, in particular Córdoba Shopping and Alto Rosario, way above our shopping centers’ average.

The EBITDA/Revenue margin for the first six months of fiscal year 2012 was around 80%, showing a 4% increase as compared to the same period of the previous fiscal year.

Total portfolio occupancy remains at high levels, near 98%. In the shopping centers of the City of Buenos Aires, the vacancy rate is almost zero, with a strong demand for rental space. In the provinces, where sales have experienced a strong growth in the last years, the occupancy rate has increased in line with the business levels. Without considering Shopping Soleil, which is in the process of redistributing stores in order to optimize its performance, portfolio occupancy would reach almost 99%.
 
2 Source: INDEC
3 Consumer’s Trust Index (Índice de Confianza al Consumidor) prepared by the Finance Research Center of the Torcuato Di Tella University http://www.utdt.edu
4 Statistical Data provided by the Argentine Central Bank – http://www.bcra.gov.ar


 
- 143 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011

Operating Data of our Shopping Centers
 

Shopping Center
Date of Acquisition
 
Gross Leaseable Area (sqm)[1]
   
Stores
   
APSA’s Interest
   
Occupancy Rate (%)[2]
   
Book Value
(In thousands of ARS)[3]
 
Alto Palermo
Nov-97
    18,701       144       100.0 %     100.0 %     267,347  
Abasto Shopping[4]
Jul-94
    37,731       175       100.0 %     100.0 %     321,700  
Alto Avellaneda
Nov-97
    37,952       146       100.0 %     95.9 %     165,836  
Paseo Alcorta
Jun-97
    13,911       112       100.0 %     99.5 %     133,140  
Patio Bullrich
Oct-98
    11,741       83       100.0 %     100.0 %     133,984  
Alto Noa Shopping
Mar-95
    19,001       92       100.0 %     100.0 %     40,565  
Buenos Aires Design
Nov-97
    13,777       62       53.7 %     96.9 %     16,711  
Alto Rosario Shopping[5]
11-Abr
    28,646       146       100.0 %     95.0 %     138,286  
Mendoza Plaza Shopping
Dec-94
    40,659       150       100.0 %     94.6 %     121,658  
Córdoba Shopping
Jun-12
    15,262       106       100.0 %     99.9 %     77,761  
Dot Baires Shopping
Sep-05
    49,527       153       80.0 %     99.9 %     488,790  
Soleil[6]
Oct-07
    13,975       71       100.0 %     92.1 %     72,090  
La Ribera Shopping [9]
Ago-11
    7,714       49       50.0 %     97.8 %     12,292  
Neuquén[7]
July-01
    N/A       -       98.1 %     N/A       20,691  
Fibesa and Other [8]
-
    N/A       -       100.0 %     N/A       0  
Total Shopping Centers
    308,597       1,489               97.7 %     2,010,851  

[1] Corresponds to total leaseable area in each property. Excludes common areas and parking spaces.
[2] Calculated dividing occupied square meters by leaseable area on the last day of the period.
[3] Cost of acquisition plus improvements, less accumulated depreciation, plus adjustment for inflation, less allowance for impairment in value, plus recovery of allowances, if applicable. Excludes works in progress.
[4] Excludes Museo de los Niños (3,732 m2).
[5] Excludes Museo de los Niños (1,261 m2).
[6] APSA took possession of this Shopping Center on July 1, 2010.
[7] Land for the development of a Shopping Center.
[8] Includes revenues from Fibesa S.A., Comercializadora Los Altos S.A. (merged with Fibesa S.A.), and others.
[9] APSA took possession of this Shopping Center on August 15, 2011.
 
Shopping Center  
Accumulated tenants’ sales as of December 31 (6 months) for the fiscal periods
 
 
(In millions of ARS)
 
 
2012
   
2011
   
2010
 
Alto Palermo
    687.48       570.54       442.71  
Abasto Shopping
    801.18       623.78       455.23  
Alto Avellaneda
    741.24       575.02       419.70  
Paseo Alcorta
    351.85       271.01       216.53  
Patio Bullrich
    267.60       223.61       167.30  
Alto Noa Shopping
    249.02       183.14       135.52  
Buenos Aires Design
    118.73       93.84       69.29  
Alto Rosario Shopping
    416.58       294.54       199.60  
Mendoza Plaza Shopping
    457.54       351.57       257.40  
Córdoba Shopping
    174.32       114.58       84.66  
Dot Baires Shopping
    654.22       491.03       366.96  
Soleil[1]
    133.27       100.27       0.00  
La Ribera Shopping [2]
    48.25       0.00       0.00  
Total
    5,101.28       3,892.94       2,814.91  
[1] APSA took possession of this Shopping Center on July 1, 2010
         
[2] APSA took possession of this Shopping Center on August 15, 2011
 


 
- 144 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011


Type of Business  
Accumulated tenants’ sales as of December 31 (6 months) for the fiscal periods [1]
 
 
(in millions of ARS)
 
 
2012
   
2011
   
2010
 
Anchor Store
    369.76       276.27       215.65  
Clothes and Footwear
    2,553.94       1,917.69       1,405.08  
Entertainment
    162.66       122.55       78.00  
Home
    908.48       740.13       520.06  
Restaurant
    456.16       340.70       233.87  
Miscellaneous
    624.98       474.26       345.36  
Services
    25.30       21.35       16.89  
Total
    5,101.28       3,892.94       2,814.91  
                         
[1] Excludes sales from La Ribera Shopping
                 

Shopping Center
 
Accumulated Rental Income as of December 31 (6 months) for the fiscal periods [1]
 
 
(In millions of ARS)
 
 
2012
   
2011
   
2010
 
Alto Palermo
    74,782       59,583       46,978  
Abasto Shopping
    75,666       58,895       44,030  
Alto Avellaneda
    50,191       37,754       27,674  
Paseo Alcorta
    32,219       25,818       21,144  
Patio Bullrich
    27,580       22,430       18,153  
Alto Noa Shopping
    13,232       9,728       6,967  
Buenos Aires Design
    9,813       8,440       7,279  
Alto Rosario Shopping
    29,212       20,499       15,063  
Mendoza Plaza Shopping
    24,717       17,498       13,459  
Córdoba Shopping
    13,157       9,286       6,678  
Dot Baires Shopping [6]
    51,201       37,120       32,028  
Soleil[2]
    9,726       5,924       0  
La Ribera Shopping [5]
    1,603       0       0  
Neuquén[3]
    0       0       0  
Fibesa and Other [4]
    22,882       17,760       12,762  
Total
    435,981       330,735       252,215  
                         
[1] Corresponds to total consolidated leases.
         
[2] APSA took possession of this Shopping Center on July 1, 2010
         
[3] Land for the development of a Shopping Center
                 
[4] Includes revenues from Fibesa S.A., Comercializadora Los Altos S.A. (merged with Fibesa S.A.), and others
 
[5] APSA took possession of this Shopping Center on August 15, 2011
         
[6] Excludes revenues from office space
                       
 
 
- 145 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
 
   
Accumulated as of December 31 for the fiscal periods (in thousands of ARS)
 
Revenues
2012
 
2011
   
2010
 
Base Rent [1]
    189,155       149,014       123,097  
Percentage Rent [2]
    122,262       84,607       50,282  
Total Rent
    311,417       233,621       173,379  
                         
Admission Rights [3]
    41,621       34,942       30,364  
Stands’ Rent
    32,388       23,067       18,479  
Parking
    21,681       15,840       12,160  
Others
    28,874       23,265       17,833  
Total Revenues
    435,981       330,735       252,215  
 
[1] Guaranteed minimum value
[2] Corresponds to revenues based on our tenants’ gross sales
[3] Corresponds to revenues from fees that tenants are required to pay upon entering into or renewing a lease.
 
 
- 146 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
II. Offices and Others

During the second quarter of fiscal year 2012, the market of Class A and A+ offices showed an average vacancy rate of 7.83%, slightly lower than the 7.88% rate recorded during the previous quarter. Throughout the year, vacancy levels decreased by almost 20% as compared to the values of early 2011. According to CB Richard Ellis, at present there are more than 148,000 sqm under construction, only 26,000 sqm of which will be inaugurated during the first quarter of 2012. The northern area is the submarket with greater growth, with 73,845 square meters under construction.
Lease prices of Class A and A+ offices are 27.01 US$ / sqm per month on average. The highest lease prices are found in Catalinas, Plaza San Martín and Plaza Roma with an average of 30-32 US$ / sqm per month, and at a second level, in Barrio Norte and Puerto Madero, with 27.89 US$ / sqm per month and 27.16 US$ / sqm per month, respectively.
Finally, during 2011 the sale of A and A+ offices increased 5.9%, reaching more than 90,000 sqm.
Office Space Prices in BA

Source: Richard Ellis.

This slight recovery in the office market had a favorable effect on the revenues from our Office segment, which was occupied by 96% as of December 31, 2011, 1% above the level recorded in the previous quarter and 6% above the occupancy level observed as of the end of fiscal year 2011.

Offices and Others
 
                                     
In ARS million
 
IIQ 12
   
IIQ 11
   
YoY var
      6M 12       6M 11    
YoY var
 
Revenues
    47.1       41.1       14.6 %     91.2       81.7       11.6 %
Operating Income
    24.4       15.9       53.5 %     49.4       38.4       28.6 %
Depreciation and Amortization
    4.8       5.0       -4.0 %     11.3       11.2       0.9 %
EBITDA
    29.2       21.0       39.0 %     60.7       49.7       22.1 %
                                                 
   
IIQ12
   
IQ 12
   
IVQ 11
   
IIIQ 11
   
IIQ 11
   
IQ 11
 
Leasable area (sqm)
    150,243       150,860       150,860       150,860       151,480       151,480  
Occupancy
    96 %     95 %     90.9 %     87.3 %     87.6 %     87.5 %
Monthly Revenues (ARS/Leased sqm)
    102,4       92.8       100.1       101.2       98.5       98.0  
Monthly Revenues (US$/Leased sqm)
    23,8       22.2       24.4       25.0       24.8       24.7  
 
 
Revenues from the Office segment increased by 14.6% in the second quarter of fiscal year 2012, whereas operating income grew by 53.5% as compared to the same quarter of the previous fiscal year. This improvement in the level of activity of offices has been mainly driven by the occupancy of some vacant floors and an improvement in rental price levels. EBITDA grew in the same line (+37.1%).
The portfolio’s occupancy level reached 96%, 5.1% higher than the one recorded as of the end of fiscal year 2011. The entire portfolio’s rental prices grew with respect to the previous quarter, reaching values close to 24 US$ / sqm. This reflects the soundness of our assets, which are located in the best areas of Downtown Buenos Aires.
The EBITDA/Revenues margin for the first six months of fiscal year 2012 was 66.5%, above the 60.8% ratio observed in the same period of fiscal year 2011.
  
- 147 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
 
Below is information on our office and other rental properties segment as of December 31, 2011.
 
   
Date of Acquisition
   
Leasable Area Sqm (1)
   
Occupancy Rate (2)
   
IRSA’s Effective Interest
   
Monthly Rental Income (in thousands of ARS) (3)
   
Annual accumulated rental income over fiscal periods
(in thousands of ARS) (4)
   
Book Value (in thousands of ARS) (5)
 
           
Dec-11
           
2012
   
2011
   
2010
       
Offices
                                                     
Edificio República
 
04/28/08
      19,884       90 %     100 %     2,278       13,189       12,660       10,518       213,161  
Torre Bankboston
 
08/27/07
      14,873       94 %     100 %     1,906       10,414       11,113       10,827       151,144  
Bouchard 551
 
03/15/07
      23,378       100 %     100 %     2,373       13,148       11,695       11,014       147,078  
Intercontinental Plaza
 
11/18/97
      22,535       96 %     100 %     2,034       11,324       10,653       10,595       77,163  
Bouchard 710
 
06/01/05
      15,014       96 %     100 %     1,750       9,830       7,917       8,151       63,764  
Dique IV, Juana Manso 295 (10)
 
12/02/97
      11,298       92 %     100 %     1,324       7,719       7,282       6,935       61,092  
Maipú 1300
 
09/28/95
      10,280       100 %     100 %     1,081       6,333       5,811       5,664       36,213  
Costeros Dique IV
 
08/29/01
      5,437       100 %     100 %     559       3,123       2,608       2,527       18,229  
Libertador 498 (15)
 
12/20/95
      2,477       100 %     100 %     379       2,469       2,850       3,983       9,819  
Suipacha 652/64
 
11/22/91
      11,453       95 %     100 %     646       3,597       3,272       2,360       10,258  
Madero 1020
 
12/21/95
      101       100 %     100 %     3       17       17       15       187  
Dot Building (13)
 
11/28/06
      11,242       100 %     96 %     864       3,197       577       -       104,069  
Other Offices (6)
  N/A       2,271       86 %     N/A       189       1,300       534       3,152       4,553  
Subtotal Offices
            150,243       96 %     N/A       15,386       85,660       76,989       75,741       896,730  
                                                                         
Other Properties
                                                                       
Commercial Properties (7)
  N/A       312       -       N/A       -               -       -       3,257  
Museo Renault
 
12/06/07
      1,275               100 %     -               180       178       1,825  
Santa María del Plata S.A.
 
07/10/97
      60,100       100 %     100 %     95       552       2,103       505       12,511  
Thames (15)
 
11/01/97
      33,191       -       100 %     -               -       175          
Nobleza Piccardo (14)
 
05/31/11
      80,028       100 %     50 %     1,361       3,921                       69,435  
Plot of Land Catalinas Norte (12)
 
12/17/09
      N/A       N/A       N/A       -               686       N/A       108,802  
Other Properties (8)
  N/A       2,072       100 %     N/A       15       -1       66       42       6,927  
Subtotal Other Properties
            176,073       81 %     N/A       1,471       4,472       3,035       900       202,757  
                                                                         
Management fees (11)
            N/A       N/A       N/A               1,073       1,689       2,353       N/A  
                                                                         
TOTAL OFFICES AND OTHERS (9)
            326,316       88 %     N/A       16,857       91,205       81,712       78,994       1,099,487  
 
Notes:
(1) Total leaseable area for each property as of 12/31/11. Excludes common areas and parking.
(2) Calculated dividing occupied square meters by leaseable area as of 12/31/11.
(3) Agreements in force as of 12/31/11 for each property were computed.
(4) Total consolidated leases, according to the RT21 method.
(5) Cost of acquisition, plus improvements, less accumulated depreciation, plus adjustment for inflation, less allowance for impairment in value.
(6) Includes the following properties: Madero 942 (fully sold), Av. de Mayo 595, Av. Libertador 602 (fully sold), Rivadavia 2774, Sarmiento 517, Dock del Plata (fully sold), Edificio Costeros (fully sold), Laminar (fully sold) and Reconquista 823/41 (fully sold).
(7) Includes the following properties: Constitución 1111, Crucero I (fully sold), Locales de Abril (fully assigned) and Casona de Abril.
(8) Includes the following properties: Constitución 1159 and Dique III (fully sold), and Canteras.
(9) Corresponds to the “Offices and Other Rental Properties” business unit mentioned in Note 3 to the Consolidated Financial Statements..
(10) The building was occupied in May 2009
(11) Income from building management fees.
(12) Includes other income from lease of parking spaces.
(13) Through Alto Palermo S.A. The building has recorded income as from August 2010.
(14) Through Quality Invest S.A.
(15) See Note 16.1 to the basic financial statements.
 
 
- 148 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
 
III. Sales and Development

In the second quarter of fiscal year 2012, the construction business in Argentina maintained its growth rate, increasing 4.1% compared to the same quarter of the previous fiscal year.

In this sense, the prices of new apartments continued their upward trend, with a growth of 12% in dollar terms in the last year.

Price of a new apartment in a residential area of Buenos Aires (USD/sqm)

Source: Reporte Inmobiliario
Real Estate Prices in BA

Sales and Development
 
                                     
in ARS M
 
IIQ 12
   
IIQ 11
   
YoY Var
      6M 12       6M 11    
YoY Var
 
Revenues
    68.8       106.3       -35.3 %     124.2       117.3       5.9 %
Operating Income
    29.0       30.6       -5.2 %     36.6       38.7       -5.4 %
Depreciation & Amortizations
    0.0       0.1       -100 %     0.0       0.2       -100 %
EBITDA
    29.0       30.7       - -5.5 %     36.6       38.9       -5.9 %

►  
During the second quarter of fiscal year 2012, sales totaled ARS 68.8 million, mainly explained by the revenue recognition of ARS 28.3 million from “Horizons” project, ARS 20.0 millions from the sale of Thames San Justo and ARS 2.6 million from the sale of plots of “El Encuentro”.
►  
For the first six months of fiscal year 2012, the gain from Valuation of Inventories at Net Realizable Value was ARS 35.2 million, derived mainly from the following projects:
·  
Museo Renault
·  
Libertador 498
·  
Condominios II (Rosario)
·  
Horizons
 
 
- 149 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011

Horizons Project
It has been fully sold. Work progress is near 99.9%. Several units have been already delivered, and the process of delivery and execution of title deeds to the rest of the units is expected to be completed by June 2012. However, these revenues will not generate strong results as most of them were recorded as Gain from Valuation of Inventories at Net Realizable Value in previous periods.

Caballito Nuevo Project (IRSA’s barter)

This property, with a surface area of 8,404 sqm, is situated in the northern area of Caballito’s residential neighborhood in the City of Buenos Aires. On May 4, 2006, IRSA and KOAD S.A. (“KOAD”), an Argentine developer, entered into an asset exchange agreement valued at US$7.5 million pursuant to which IRSA sold to Koad plot number 36 of “Terrenos de Caballito” and KOAD S.A. agreed to develop a residential complex called “Caballito Nuevo”, at its costs, consisting of two 34-story towers containing 220 apartments each, consisting of one, two and three bedroom residential units with surface areas ranging from 40 to 85 sqm, totaling approximately 28,000 saleable sqm. The project offers a wide variety of amenities and services. As a result of this transaction, Koad delivered to IRSA 118 apartments and 61 parking lots in the first tower, representing 25% of the total square meters for sale. As of December 31, 2011, 12 apartments and 9 parking spaces, for a total value of US$ 2.0 million, are pending sale.

El Encuentro Project

In the district of Benavidez, Municipality of Tigre, 35 kilometers north from downtown Buenos Aires, a 110-hectare gated residential complex known as “El Encuentro” is located, consisting of a total of 527 lots with a total saleable area of 610,785.15 sqm with two privileged front accesses: the main one to Vía Bancalari and the service one to Highway No. 9, allowing an easy way to and from the city. On May 21, 2004 an exchange deed was signed for the original lot whereby DEESA agreed to pay US$ 4.0 million to our subsidiary Inversora Bolívar, of which US$ 1.0 million were paid in cash and the balance of US$3.0 million was paid on December 22, 2009, with the transfer of 110 residential plots already chosen, totaling a saleable area of 127,795 sqm. The development of the project is completed and equipped with power supply, water, sewage, effluent treatment plant, public lighting, finished driveways and accesses, buildings, sports facilities, etc. As of December 31, 2011, 32 units are available for sale for US$ 4.7 million.

Sale of AGROCOM plot

IRSA sold a plot of approximately 7.9 hectares located at Thames 1868 street (between Alberto Lartigau and Ramón Falcón streets), in the district of San Justo, Province of Buenos Aires.

The transaction price was US$ 4.7 million. As of June 30, 2011 this land reserve was valued at a book value of AR$ 3.89 (approximately US$ 0.91).

Purchase of Nobleza Piccardo Plot

In May 2011, IRSA acquired 50% of the property where Nobleza Piccardo had its manufacturing plant. It is located in the City of San Martin, in the Province of Buenos Aires. The total area of this plot is 160,000 sqm with a current built area of 80,000 sqm. Due to its size and location it is an excellent site for the future development of different segments.
 
Nobleza Piccardo will lease 100% of the plot during the first year, releasing it partially until the 3rd year under lease, at which moment it will release the whole plot. We are preparing a Master Plan in order to apply before the authorities of San Martín's Town Hall for the zoning parameters that will allow us to develop a mixed used project.

 
- 150 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011

Below is information on our Sales and Development segment as of December 31, 2011.
 

DEVELOPMENT   Date of Acquisition      
Estimated / Real Cost (in thousands of ARS)(1)
   
Area intended for Sale (sqm) (2)
    Total Units / Lots (3)     IRSA’s Effective Interest     Percentage Built     Percentage Sold (4)     Accumulated Sales
(in thousands of ARS) (5)
    Accumulated Sales as of December 31 of Fiscal Year (in thousands of ARS) (6)     Book Value (in thousands of ARS) (7)  
   2012      2011      2010    
Residential Apartments
                                                                       
Torres Renoir
 
09/09/99
      22,861       5,383       28       100 %     100 %     100 %     53,940       -       -       142       -  
Caballito Nuevo (15)
 
11/03/97
      -       841       23       100 %     100 %     81.18 %     7,119       7,119       26,560       -       3,101  
Torres de Rosario (8)
 
04/30/99
      -       5,654       112       95.59 %     100 %     31.39 %     3,503       3,503       -       -       19,430  
Libertador 1703 y 1755 (Horizons) (14) (16)
 
01/16/07
      399,355       44,648       467       50.00 %     100 %     100 %     53,928       53,928       -       -       175,782  
Other residential apartments (9)
    N/A       231,677       156,081       1,643                               310,084       371       -       -       84,405  
Subtotal Apartments
            653,893       212,607       2,273                               428,574       64,921       26,604       142       282,718  
                                                                                                 
Residential Communities
                                                                                               
Abril/Baldovinos (10)
 
01/03/95
      130,955       1,408,905       1,273       100 %     100 %     99.50 %     237,062       -       466       4,141       1,085  
El Encuentro (17)
 
11/18/97
      -       38,410       32       100 %     100 %     64.65 %     11,461       7,979       7,202       -       3,345  
Villa Celina I, II y III
 
05/26/92
      4,742       75,970       219       100 %     100 %     100 %     14,028       -       -       -       -  
Subtotal Residential Communities
            135,697       1,523,285       1,524                               262,551       7,979       7,668       4,141       4,430  
                                                                                                 
Land Reserve
                                                                                               
Puerto Retiro
 
05/18/97
              82,051       -       50.00 %     0.00 %     0.00 %     -       -       -       -       54,275  
Santa María del Plata
 
07/10/97
              715,951       -       100 %     0.00 %     10.00 %     -       -       -       -       158,750  
Pereiraola
 
12/16/96
              1,299,630       -       100 %     0.00 %     100 %     46,311       -       -       -       -  
Plot of Land Rosario (8) (18)
 
04/30/99
              31,000       -       95.59 %     0.00 %     100 %     31,659       20,587       5,669       -       6,220  
Plot of Land Caballito
 
11/03/97
              7,451       -       100 %     0.00 %     100 %     -       -       -       -       -  
Neuquén (8)
 
07/06/99
              4,332       1       95.59 %     0.00 %     100 %     -       -       -       -       -  
Plot of Land Baicom
 
12/23/09
              6,905       -       50.00 %     0.00 %     0.00 %     -       -       -       -       4,459  
Canteras Natal Crespo
 
07/27/05
              4,320,000       -       50.00 %     0.00 %     0.00 %     285       12       12       6       5,967  
Plot of Land Beruti (8)
 
06/24/08
              3,207       -       95.59 %     0.00 %     100 %     -       -       75,373       -       -  
Pilar
 
05/29/97
              740,237       -       100 %     0.00 %     0.00 %     -       -       -       -       3,408  
Coto Air Space (8)
 
09/24/97
              24,000       -       95.59 %     0.00 %     0.00 %     -       -       -       -       16,110  
Torres Jardín IV
 
07/18/96
              3,176       -       100 %     0.00 %     100 %     -       -       -       -       -  
Thames
 
11/01/97
              87,300               100 %     0.00 %     100 %     20,022       20,022                          
Plot of Land Caballito (8)
 
10/22/98
              23,389       -       95.59 %     0.00 %     0.00 %     -       -       -       -       45,814  
Patio Olmos (8)
 
09/25/07
              5,147       -       95.59 %     100 %     0.00 %     -       -       -       -       33,385  
Other Land Reserves (11)
    N/A               13,603,466       1                               2,213       -       1,969       -       74,993  
Subtotal Land Reserves
                    20,957,242       2                               100,490       40,621       83,023       6       403,381  
 
 
- 151 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
                                                                                                 
Others
                                                                                               
Madero 1020
 
12/21/95
              5,069       N/A       100 %     100 %     100 %     18,848       -       -       71       -  
Della Paolera 265
 
08/27/07
              472       N/A       100 %     100 %     100 %     6,850       -       -       -       -  
Madero 942
 
08/31/94
              768       N/A       100 %     100 %     100 %     6,137       -       -       -       -  
Dock del Plata
 
11/15/06
              7,942       N/A       100 %     100 %     100 %     84,206       -       -       34,492       -  
Libertador 498
 
12/20/95
              2,484       N/A       100 %     100 %     100 %     93,558       10,600       -       29,982          
Edificios Costeros
 
03/20/97
              6,389       N/A       100 %     100 %     100 %     68,580       -       -       68,580       -  
Libertador 602
 
01/05/96
              677       N/A       100 %     100 %     100 %     10,948       -       -       -       -  
Laminar
 
03/25/99
              6,521       N/A       100 %     100 %     100 %     74,510       -       -       -       -  
Reconquista 823
 
11/12/93
              5,016       N/A       100 %     100 %     100 %     31,535       -       -       -       -  
Locales Crucero I
                    192       N/A       100 %     100 %     100 %     2,006       -       -       -       -  
Others (12)
    N/A               -       N/A       N/A       N/A       N/A       1,014       45       34       (2 )     -  
Subtotal Others
                    42,547                                       422,506       10,645       34       133,123       -  
                                                                                                 
TOTAL (13)
            789,590       22,735,681       3,799                               1,214,121       124,166       117,329       137,412       690,529  

                           
Notes:
       
(1) Cost of acquisition plus total investment made and/or planned for residential property and residential community projects already developed or under development (adjusted for inflation to 02/28/03, as applicable).
   
(2) Total property area intended for sale upon completion of the development or acquisition and before sale of any of the units (including parking and storage spaces, but excluding common areas). In the case of Land Reserves, the land area was considered.
       
(3) Represents the total units or plots upon completion of the development or acquisition (excludes parking and storage spaces).
       
(4) The percentage sold is calculated dividing the square meters sold by the total saleable square meters, including sales transactions instrumented by preliminary sales agreements for which no title deed has been executed yet
       
(5) Includes only the cumulative sales consolidated by the RT21 method adjusted for inflation as of 02/28/03.
       
(6) Corresponds to the company’s total sales consolidated by the RT4 method adjusted for inflation as of 02/28/03. Excludes turnover tax deduction.
       
(7) Cost of acquisition plus improvements, plus capitalized interest of consolidated properties in portfolio at December 31, 2011, adjusted for inflation as of 02/28/03
       
(8) Through Alto Palermo S.A.-
 
(9) Includes the following properties: Torres de Abasto through APSA (fully sold), units to be received in Beruti through APSA, Torres Jardín,  Edificios Cruceros (fully sold), San Martin de Tours, Rivadavia 2768, Alto Palermo Park (fully sold), Minetti D (fully sold),
Dorrego 1916 (fully sold), Padilla 902 (fully sold), Caballito swap receivable and Pereiraola plots through IRSA.
       
(10) Includes sales of shares in Abril.-
 
(11) Includes the following land reserves: Pontevedra Plot of Land, Isla Sirgadero, San Luis Plot of Land, Mariano Acosta, Merlo and Intercontinental Plaza II through IRSA, Zetol and Vista al Muelle through Liveck  and C.Gardel 3134 (fully sold), C.Gardel 3128 (fully sold), Aguero 596 (fully sold), República Arabe Siria (fully sold), Terreno Mendoza(fully sold), Zelaya 3102, Conil, Soleil air space and Others APSA (through APSA).-
   
(12) Includes the following properties: Puerto Madero Dock XIII (fully sold). It also includes income from termination and income from expenses recovered in connection with common maintenance fees, stamp tax and associated professional fees.
       
(13) Corresponds to the “Development and sale of properties” business unit mentioned in Note 3 to the Consolidated Financial Statements.
                         
(14) Owned by CYRSA S.A.
       
(15) 89% of the square meters were sold under title deed. The Book Value includes Net Realizable Value for $ 418.8 thousand, representing 1% of the total square meters.
       
(16) 99.4% of the sales have been recognized in the Net Realizable Value line.
       
(17) 69% of the square meters were sold under title deed.
                 
(18) The Book Value includes Net Realizable Value recorded for $ 7,107.1 thousand as offer letters, representing 26% of the total square meters.
                 

 
- 152 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011

IV. Hotels

During the past quarter, the hotel business in the City of Buenos Aires maintained the same levels of rental prices and occupancy rates as in the previous quarters. However, our Llao Llao hotel has suffered the effects of the eruption of the volcano in Chile that affected the arrival of tourists to the City of Bariloche as its airport was closed down. In the second quarter of 2012, the hotel’s occupancy rate reached 15% and room rates were also revised downwards in order to attract tourists despite the climate issues caused by the volcano.

Hotels
 
                                     
in ARS M
 
IIQ 12
   
IIQ 11
   
YoY var
      6M 12       6M 11    
YoY var
 
Revenues
    45.4       56.5       -19.6 %     85.0       105.1       -19.1 %
Operating Income
    -1.7       7.3       -123.3 %     -2.6       10.9       -123.9 %
Depreciation and amortizations
    3.3       3.4       -2.9 %     6.5       7.1       -8.5  
EBITDA
    1.6       10.7       -85.0 %     3.9       18.0       -78.3 %
                                                 
   
IIQ 12
   
IQ 12
   
IVQ 11
   
IIIQ 11
   
IIQ 11
   
IQ 11
 
Average Occupancy
    62.4 %     76.3 %     61.1 %     74.2 %     78.8 %     75.9 %
Average Rate per Room (ARS/night)
    703       714       660       776       707       713  
Average Rate per Room (US$/night)
    163       171       161       191       178       155  

►  
For the reasons explained above, the hotel segment recorded a decrease in revenues of 19.6%. EBITDA fell 85.0%.
►  
The hotels located in the City of Buenos Aires have partly offset the reduced operations of our Llao Llao Hotel, featuring occupancy rates of 80% and higher rates.

The following is information about our hotels as of December 31, 2011:

Hotels
Date of Acquisition
IRSA’s Effective Interest
Number of Rooms
Average Occupancy (1)
Average Price per Room (ARS) (2)
Accumulated Sales as of December 31 of Fiscal Year
(in thousands of ARS)
Book Value (in thousands of ARS)
2012
2011
2010
 
Intercontinental (3)
11/01/97
76.34%
309
77.1%
719
45,876
40,933
30,932
52,678
Sheraton Libertador (4)
03/01/98
80.00%
200
87.4%
608
29,064
22,131
18,037
39,482
Llao Llao (5)
06/01/97
50.00%
201
15.1%
1,127
10,094
42,042
27,307
72,802
Terrenos Bariloche (5)
12/01/06
50.00%
N/A
N/A
N/A
N/A
 N/A
 N/A
21,900
Total
 
-
710
62.4%
703
85,035
 105,106
   76,276
186,862

Notes:
                 
1) Cumulative average for the 3-month period.-
2) Cumulative average for the 3-month period.-
3) Through Nuevas Fronteras S.A. (IRSA’s subsidiary).
4) Through Hoteles Argentinos S.A.-
5) Through Llao Llao Resorts S.A.-

 
 
- 153 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
V. Equity Investments

Investment in Hersha Hospitality Trust (“Hersha”)

Hersha is a Real Estate Investment Trust (REIT) listed on the New York Stock Exchange (NYSE: HT), and is the holder of an indirect controlling interest in 77 hotels, mainly distributed in the northeastern coast of the United States, totaling 9,951 rooms. IRSA’s Chairman and CEO, Mr. Eduardo S. Elsztain, is member of Hersha’s Board of Trustees since 2009.

As of December 31, 2011, IRSA and its subsidiaries held 15,584,069 shares in Hersha, accounting for a 9.17% equity interest.  Additionally, IRSA, through its subsidiaries, holds an option for an initial term of 5 years over 5,700,000 additional common shares, at US$ 3.0 each. Should it exercise such options, IRSA and its subsidiaries would hold a fully diluted interest of 12.12%.

Through the second quarter of fiscal year 2012 Hersha’s stock price increased sharply, making IRSA’s option on Hersha stock value also increase sharply.

Interest in Banco Hipotecario S.A. (“BHSA”)

BHSA is a leading bank in the mortgage lending segment, in which IRSA held a 29.77% interest as of December 31, 2011 (excluding portfolio shares). For further information please refer to http://www.cnv.gob.ar or http://www.hipotecario.com.ar. During the 6-month period of 2012, BHSA’s contribution to IRSA’s income amounted to ARS 53.0 million, generated by the Bank’s results.

Interest in Metropolitan 885 Third Ave. LLC (“Metropolitan”) through New Lipstick LLC (“New Lipstick”)

IRSA indirectly holds a 49% interest in New Lipstick LLC, a holding company that is owner of Metropolitan, a company whose main asset is the so-called “Lipstick” office building, and the debt associated to this asset, which amounts to US$ 115.0 million, following a restructuring previously reported by IRSA. The Lipstick Building is a landmark building in the City of New York, located in Midtown Manhattan. It has a gross leasable area of more than 57,500 square meters. As of December 31, 2011, more than 89.6% of the building’s area was occupied, at an average rental price in excess of US$ 60.0 per sqm.

Purchase of Building located at 183 Madison Ave, New York, NY

In December 2010, IRSA purchased a building located at 183 Madison Avenue, New York, NY, through Rigby 183 LLC (“Rigby 183”), in which IRSA indirectly holds 49% through IMadison LLC (“IMadison”). The purchased property is a building intended for the lease of office space, featuring commercial stores on its lower floors also intended for lease. The building has 19 floors and a net leasable area of over 23,200 sqm. As of December 31, 2011, this building had an occupancy level above 72% and an average rental price above USD 39 per sqm.


 
- 154 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
VI. Financial Debt and Other Indebtedness

Consolidated financial debt as of December 31, 2011

Description
Issue Currency
 
Outstanding Amount1
   
Rate
 
Maturity
Short term debt
ARS
    125,968,777    
Variable
 
< 180 days
IRSA’s Series I Notes due 2017
US$
    150,000,000       8.50 %
Feb-17
IRSA’s Series II Notes due 2020
US$
    150,000,000       11.50 %
Jul-20
Other Debt
                   
IRSA’s Total Debt
      465,153,201            
Short term debt
ARS
    10,269,517    
Variable
 
< 7 days
APSA’s Series I Notes due 20122
US$
    5,112,188       11.00 %
Jun-12
APSA’s Series II Notes due 20173
US$
    120,000,000       7.88 %
May-17
Other Debt
      17,760,536            
APSA’s Total Debt
      153,052,241            
Total Consolidated Debt
      616,250,003            
                     
1 Principal face value in US$ at an exchange rate of 4.304 ARS = 1 US$, without considering elimination of balances with subsidiaries.
2 As of 12/31/11 IRSA held a face value of US$ 1.5 million and APSA had repurchased a face value of US$ 0.5 million
3 As of 12/31/11 APSA had a face value of US$ 10.0 million.
   
     

·  
Relevant Events
 
Acquisition of “Esplendor Savoy” Hotel, Rosario, Buenos Aires
 
In December 2011, IRSA indirectly acquired 49% of Bitania 26 S.A.’s capital stock, a company that owns “Esplendor Savoy” hotel in the City of Rosario. The purchase price was ARS 21,390,000. The hotel has 84 rooms and is located in downtown Rosario.
 
IRSA’s Shareholders’ Meeting held on October 31, 2011

At the Meeting held on October 31, 2011, the Shareholders resolved, among other matters:

·  
That 5% of the income, i.e., the sum of ARS 14,105,200, be transferred to the Legal Reserve account, and that the sum of ARS 211,575,000 be allocated to the payment of a cash dividend, delegating to the Board of Directors its implementation, and that the balance be transferred to the Freely Available Reserves account.
 
APSA’s Shareholders’ Meeting held on October 31, 2011
 
At the Meeting held on October 31, 2011, the Shareholders resolved:
 
·  
To ratify the advance dividend resolved in due course by the Board of Directors for the amount of ARS 130,824,500.
 
·  
To pay a cash dividend in addition to the one already paid as advance dividend, for the amount of ARS 117,054,600, totaling ARS 247,879,100 and to allocate the balance to the “Freely Available Reserves” account, delegating to the Board of Directors the payment thereof within the legal terms.
 
Payment of Dividends by IRSA
 
On November 14, 2011, IRSA’s Board of Directors resolved to make available, as from November 21, 2011, a cash dividend of ARS 211.6 million equivalent to 36.6% of the stock capital, representing an amount per share of ARS 0.366 and an amount per ADR of ARS 3.66, as resolved upon by IRSA’s Shareholders’ Meeting dated October 31, 2011.
 
Payment of Dividends by APSA
 
On November 11, 2011, APSA’s Board of Directors resolved to make available to the Shareholders pro rata to their respective shareholdings, as from November 21, 2011, a cash dividend of ARS 117,054,600 million equivalent to 92.90% of the stock capital, representing an amount per ADR of ARS 3.71, as resolved upon by the Shareholders’ Meeting dated October 31, 2011.
 
 
- 155 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
Subsequent Events
 
Investment in Supertel Hospitality Inc.
 
On February 6, 2012, IRSA, through a subsidiary Real Estate Strategies, L.P. (“RES”), entered into an agreement with Supertel Hospitality Inc. (“Supertel”) for the purchase of 3,000,000 convertible preferred shares to be issued by Supertel for an aggregate amount of US$ 30 million. On February 1, 2012, RES received 2,100,000 shares and paid US$ 21,000,000 as consideration. The transaction with respect to the remaining 900,000 shares is expected to be completed soon.
 
Supertel is a Real Estate Investment Trust (REIT) listed on the Nasdaq, under the symbol “SPPR”, which started to operate by the end of 1970 and completed its Initial Public Offering in 1994. The company focuses on medium-class hotels and long-term stays. At present, it controls 101 hotels in 23 states of the United States of America, which are operated by different operators and franchises, such as Comfort Inn, Days Inn, Hampton Inn, Holiday Inn, Sleep Inn and Super 8, among others.
 
US$ 300 Million Global Note Program

 
Under our US$ 300 Million Global Note Program approved by our Shareholders’ Meeting dated October 31, 2011, on February 7, 2012 we started the period of issuance and placement through public offering of Notes for a total amount of up to ARS 140 million, capable of being increased to ARS 300 million, to be issued in two series, Series III and IV:
 
 
·  
Series III Notes, accruing interest at variable rate (Badlar plus a margin to be tendered) for a principal amount of up to Ps. 70 million, due 18 months after their issue date and repayable in 3 consecutive payments within 12, 15, and 18 months.
 
 
·  
Series IV Notes, accruing interest at fixed rate, due 24 months after their issue date, for a U.S. dollar equivalent principal amount of up to ARS 70 million, to be subscribed and paid in pesos at the applicable rate of exchange, due 24 months after their issue date and repayable in 4 equal consecutive payments within 15, 18, 21 and 24 months.
 
 
The proceeds of this issue of notes will be used to repay short term debt and for working capital in Argentina.
 
 
As of the date of issuance of these financial statements, the Company is closing the period of placement and issuance of the notes.
 
 

 
- 156 -

 
IRSA Inversiones y Representaciones Sociedad Anónima - Earnings Release as of December 31, 2011
 
VI. Brief comment on future prospects for the next period

During the past years private consumption has boosted, and our shopping centers have experienced significant growth. Occupancy has remained close to 100% and our tenants’ sales have reached growth rates higher than 30%, above annual inflation and activity levels. Prospects for the next quarter and the closing of fiscal year 2012 are positive, in line with the expansion observed in our shopping centers in the past semester. A higher growth is noted in the newest shopping centers that are in a maturing stage, such as Soleil or Dot Baires Shopping or those recently refurbished, such as Córdoba Shopping or Alto Rosario, whose turnovers have soared thanks to the reforms made.

Undoubtedly, greater Buenos Aires and the interior of Argentina will continue to drive growth. In greater Buenos Aires, the consumers’ purchasing potential is much higher than the current one, and in the interior shopping centers arise as a very attractive alternative for family entertainment and leisure during weekends. Meanwhile, in the City of Buenos Aires we expect to undertake expansion and remodeling works in various of our shopping centers, in line with the higher demand for space and scarce availability observed.

Among our current investments, we will continue to invest in the revamping of our Soleil shopping center, purchased in July 2010, so as to position it as the first Premium Outlet in Argentina and attract the best public in the area, optimizing its turnover. In addition, we have launched, through our subsidiary Arcos del Gourmet S.A., the project Espacio Urbano in the area of Palermo, which features an open space aimed at boosting the commercial area with different innovative and luring proposals.

We will also continue to work as we have done until now in the improvement of services at our shopping centers, with the main goal of maintaining occupancy levels at 100%, increasing the number of visitors to our shopping centers and improving our brands’ turnover. In this sense, we will continue to partner with financial institutions in the promotion of credit card sales, which have proved to be very effective in terms of sales and have been favorably received by the public in inflationary contexts such as the current one.

As concerns rental Offices, during the second quarter of 2012 the market has remained solid. Vacancy in the premium office market recorded no changes from previous quarter figures, although it decreased by 20% compared to 2011 values. Rental prices have been more stable, as they maintained the levels of the previous quarter and even increased one point from 2011 values. Our offices’ behavior was similar to the market’s, with occupancy rates rising to more than 96% and rental prices remaining at previous quarter levels. Prospects for this segment are promising. As reported by Richard Ellis, more than 148,000 sqm of A+ and A offices are currently under construction, 17% of which will become operational during the next quarter. In this context, we plan to launch in the near future our Catalinas Norte project on a plot of land purchased by the Company in December 2009, which will add 35,000 sqm of gross leaseable area to our premium office portfolio and is set to become another landmark building, located in one of the finest spots of the City of Buenos Aires.

Real estate continues to be the main choice for investment in Argentina, as it has proved to be a very good means of preserving dollar values and hedging against inflation. In this sense, despite the scarce development of the Argentine mortgage market, which according to Central Bank data remains below 2%, prices in the residential and commercial segments have continued their upward trend, without any prospects of deceleration or downward revision. These prospects favor our Sales and Developments segment, in which we expect to complete the delivery of the remaining units in the Horizons project and to finish implementing the sale of Torres Rosario and El Encuentro.

As concerns the international segment, we will continue developing our strategy of selective investments outside of Argentina, involving top level assets, as the case of the Lipstick Building, Madison 183, Hersha Hospitality Trust and recently, Supertel Hospitality Inc. All of them are opportunistic investments made at attractive prices or with capital structures with potential for improvement.

The Company’s strong cash generation and low indebtedness level, along with its experience in taking advantage of opportunities and its access to the capital markets allow us to envisage a promising future for IRSA, aimed at consolidating the best real estate portfolio in Argentina.
 
- 157 -

 
SIGNATURES
 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Buenos Aires, Argentina.
 
   IRSA Inversiones y Representaciones Sociedad Anónima
   
   By:  /S/ Saúl Zang  
     Name: Saúl Zang  
     Title: Responsible for Relationships with the Markets  
Dated: June 22, 2012